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engineeRing youR FuTuRE

u.S.

uK

CANADA iRElAND

FRANCE

DENMARK

GERMANy

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St engineering is a global technology, defence and engineering group headquartered in Singapore. As leaders of the aerospace, electronics, land systems and marine sectors, we leverage industry 4.0 to create people-centric, multi-disciplinary smart engineering solutions.

our Aerospace sector offers a wide spectrum of aircraft maintenance, engineering and training services for both military and commercial aircraft operators. These services include airframe, component and engine maintenance, repair and overhaul, aircraft design engineering and parts manufacturing, aviation materials and asset management, as well as pilot training.

our Electronics sector specialises in the design, development and delivery of iCT products, solutions and services addressing the needs of Smart Cities for Connectivity, Mobility and Security.

our land Systems sector delivers advanced and customised land systems, security solutions and their related through-life support for defence, homeland security and commercial applications.

our Marine sector provides turnkey and sustainable defence and commercial solutions in the marine, offshore and environmental engineering industries.

MAlAySiA

THAilAND

HoNG KoNG

CHiNA

TAiwAN

SiNGAPoRE

AuSTRAliA

MyANMAR

Middle eASt

ASiA & oCeAniA

peRfoRMAnCe

Financial Review 60

investor Relations 70

Awards 72

world-Class workforce 74

SuStAinAbility & goveRnAnCe

Sustainability Report 76

Community outreach 92

Corporate Governance 94

we serve customers in more than 100 countries from our global offices.

CoRpoRAte oveRview

Financial Highlights 02

letter to Shareholders 04

board of Directors 14

Additional information on Directors Seeking Re-election

20

Senior Management 28

Five-year Plan overview 30

innovation Highlights 2018 34

opeRAting Review& outlook

Aerospace 36

Electronics 42

land Systems 48

Marine 54

finAnCiAl RepoRt

Directors’ Statement 126

independent Auditors’ Report 135

Financial Statements 142

Consolidated income Statement 144

Consolidated Statementof Comprehensive income

145

Consolidated balance Sheet 146

Consolidated Statementof Changes in Equity

148

Consolidated Statement of Cash Flows 152

Notes to the Financial Statements 154

Sectoral Financial Review 275

Shareholding Statistics 291

SGx listing Manual Requirements 293

Corporate information 294

FiNANCiAlHiGHliGHTS

Revenue bReAkdownopeRAting CASH flow

$0.64b2017: $0.76b

-16%

RetuRn on equity

22.0%2017: 22.7%

-0.7%ptS

dividend peR SHARe

15.0¢2017: 15.0¢

oRdeR book

$13.2b2017: $13.4b

-1%

RetuRn on SAleS

7.7%2017: 8.1%

-0.4%ptS

eARningS peR SHARe

15.85¢2017: 16.13¢

-2%

by CuStoMeR type

69%CoMMERCiAl

31%DEFENCE

by SeCtoRS

39%AERoSPACE

19%lAND SySTEMS

1%oTHERS

32%ElECTRoNiCS

9%MARiNE

by loCAtion of CuStoMeRS

62%ASiA

20%u.S.

7%oTHERS

11%EuRoPE

Comparative figures were restated on the adoption of Singapore Financial Reporting Standards (international) (SFRS(1)) with effect from 1 January 2018.

02 St engineeRing

AerospaceElectronicsland SystemsMarineothers

$6.70b

$6.52b

Revenue by SeCtoR ($m)

2,647 2,143 1,282 574 52

2018

2,535 2,011 1,244 637 94

2017

$620.7m

$611.8m

pRofit befoRe tAx by SeCtoR ($m)

(36.6) 320.0 224.7 62.3 50.3

2018

318.5 200.2 85.0 22.4(14.3)

2017

244.8 168.8 87.4 27.0(25.4)

$494.2m

$502.6m

net pRofit by SeCtoR ($m)

244.6 186.5 52.9 45.2(35.0)

2018

2017

03ANNuAl REPoRT 2018

lETTER To SHAREHolDERS

kwA CHong SengCHAiRMAN

vinCent CHongPRESiDENT & CEo

The year 2018 was busy and rewarding for us as we executed our strategy of building a foundation for growth and sustainable profitability.

“

”

04 St engineeRing

Dear Shareholders

in 2018, discussions on industry 4.0 intensified, as the world saw and experienced how technology was disrupting existing businesses and creating winners and losers. in addition, political developments such as the u.S.-China trade tensions and brexit created much uncertainty that also negatively impacted economic growth around the world.

Fortunately, as a technology, defence and engineering group, we are on the right side of history. we strengthened our core segments and continued to drive changes to reap the benefits from disruption. The year 2018 was busy and rewarding for us as we executed our strategy of building a foundation for growth and sustainable profitability.

Throughout the year, while we were cautious about the short- term market outlook, our plans were not unduly influenced by quarter-to-quarter results. At the end of the financial year 2018, we delivered a resilient set of financial results, recording a 3% year-on-year (y-o-y) growth in Group revenue to $6.70b. Compared to 2017, Profit before tax (PbT) grew 1% to $620.7m and Profit Attributable to Shareholders (Net Profit) dropped 2% to $494.2m. Excluding the $37m one-off charges incurred, the Group would have fared better with a 7% y-o-y increase in PbT. These one-off charges were incurred for portfolio rationalisation, transaction cost of the proposed acquisition of MRA Systems (MRAS), and the early redemption of the MTN1. Net Profit would have been 9% higher y-o-y if the one-off favourable u.S. tax adjustment

of $20m recorded in 2017 was excluded as well. At the business sector level, revenue for the Aerospace sector was 4% up y-o-y at $2.65b and Net Profit was flat y-o-y at $244.6m due to the MRAS acquisition-related expenses, partially offset by net divestment gains. Revenue for the Electronics sector grew 7% to $2.14b and Net Profit was up 10% to $186.5m. Net Profit for the land Systems sector dropped 39% y-o-y to $52.9m although its revenue grew 3% y-o-y to $1.28b due to the absence of prior year’s favourable u.S. tax adjustment, the divestment impact of its road construction business in india and full impairment charges for its road construction business and automotive MRo business in brazil. At the Marine sector, while revenue dropped 10% y-o-y to $574m mainly due to lower revenue recognition from its u.S. business, its Net Profit grew 67% to $45.2m mainly due to better performance of its Singapore operations.

we continued to be well diversified in our revenue stream across business sector, geography and customer type. Revenue mix of the business sectors comprised 39% for Aerospace, 32% for Electronics, 19% for land Systems and 9% for Marine. Geographically, business units in Asia including Singapore contributed 73% to Group revenue, while our business units in the u.S. and Europe generated 18% and 8% of Group

we ended 2018 with an order book of $13.2b, providing the Group with a healthy pipelineof revenue for the next few years.

revenue respectively. Revenue split between Commercial and Defence sales was 69%:31%.

we ended 2018 with an order book of $13.2b, providing the Group with a healthy pipeline of revenue for the next few years. we expect to recognise $4.9b from the order book as revenue in 2019.

in 2018, we spent about $335m on capital expenditure, about 23% more than what we spent in 2017. A significant portion of this expenditure was deployed for capacity expansion to support growth opportunities, such as our new composite manufacturing plant and new aircraft hangar in Germany for the Aerospace sector, and a building extension in the west of Singapore for our Electronics sector. we also funded the purchase of two aircraft for our aircraft leasing business.

our cash and cash equivalent balance stood at about $414m, after drawing down our cash for the early redemption of MTN. we remain committed to optimising cash flow, maintaining capital discipline and improving value and returns.

1 uS$500m Notes issued under the Multicurrency Medium Term Notes (MTN) Programme.



For our shareholders, your board of Directors has recommended a final dividend of 10.0 cents per share. Together with the interim dividend of 5.0 cents per share paid to you in August 2018, the total dividend for the full year will be 15.0 cents per share. This represents a dividend yield of 4.4%, computed using the average closing share price of the last trading day of 2018 and 2017.

five yeAR plAn: CleAR foCuS And StRAtegy in March, we shared our five-year plan (2018-2022): the set of goals we have put in place to help us achieve our longer-term aspiration of becoming a global technology, defence and engineering powerhouse.

our focus and strategy are clear. As presented on page 30, our plan consists of continuing to grow and strengthen our core businesses as well as pursuing new opportunities especially in international defence business and smart city. we will continue to invest our resources to strengthen our key assets and capabilities: our people and culture; our global marketing and customer network; our cutting-edge technology and our many innovations; and our financial strength.

we have also set specific targets: by 2022, we aim to double our revenue from our Smart City businesses to over $2b; we want our core and other businesses to grow at a compound annual growth rate of two to three times annual global GDP growth rate; we are targeting to have two-thirds of our revenue growth come from overseas markets; and we want

to have our net profits grow in tandem with our revenue. we are now intensely focused on executing our plan and in this annual letter, we will expand on our strategy to give our shareholders a clearer idea of the roadmap. The business developments and achievements of the four business sectors in 2018 are covered in the Operating Review and Outlook section on page 36 to 59.

terms of marketing, prototype development and redelivery to our customers.

Shipbuilding and ship repair continue to be strategic to us. what sets us apart in both the defence and commercial segments is our unique edge: we are just one of few shipyards in the world with a full range of capabilities to support the entire lifecycle of a ship, from ship design, shipbuilding and system

we are now intensely focused on executing our plan to grow and strengthen our core businesses as well as pursuing new opportunities especially in international defence business and smart city.

Strengthening the Core. Strengthening our core is about building lines of business that are globally competitive, whether in niche areas or in segments that have the potential scale and competence to be differentiated internationally.

Many of our businesses in the Aerospace sector are already well established. our airframe MRo business continues to be the world leader; proven by the fact we were once again voted overall MRo of the year at the Aviation 100 MRo Global Awards. our core in airframe, engines and components MRo services continues to perform, leading to further investments to expand our capacities in China and the u.S.. we continue to be a leader in the Passenger-to-Freighter conversion business, having now achieved the stringent programme requirements and milestones for our A330 and A320/A321 conversions. our conversion programmes are tracking well in

integration, to ship upgrades, repair and maintenance. in 2018, we focused on strengthening the operations and profitability of our Marine sector and built up our order book against bottom-of-the-market industry conditions. we saw an improved performance in the sector. The recovery, both in terms of financial performance and order book, reflects the strength, competence and resilience of our Marine business. we are committed to growing our strategic lines of business and we have been keeping a constant lookout for acquisition targets that can contribute profitable revenue streams and sharpen our competitive edge. in this regard, we are excited by our proposed acquisition of MRAS, an established manufacturer of engine nacelle systems, which is a high-value, high iP content business that complements our Aerospace business. The addition of MRAS into the fold will enable our Aerospace sector to move

06 St engineeRing

further up the value chain into the original equipment manufacturing business of high-value components. This acquisition will be our largest, and is expected to be earnings accretive for the Group and our Aerospace sector from the first year of the transaction close.

defence business: growing internationally to pave way for the future. To succeed in the international defence business, we need to transition from a Singapore-based production model to one that is more collaborative and closer to our customers. we will pursue options such as the localisation of manufacturing or support operations in-country, the setting up of more teaming and joint venture agreements, licensing and technology transfer, as well as local capability investments.

The experiences from our participation in two large u.S. defence programmes, namely the engineering and manufacturing development programme for the u.S. Marine Corps ACV 1.1 and the u.S. Army Mobile Protected Firepower programme, have furnished us with invaluable learning points and references for future competition. in the u.S. defence marine domain, we have secured contracts from the u.S. Navy for Auxiliary Personnel lighter berthing barges and a new oceanographic Survey Ship. we were also awarded a contract by a foreign government for two logistics Support Vessels, to be designed and constructed in our u.S. shipyard.

we will continue our efforts to compete and win in future programmes in the largest defence market in the world. outside the u.S. market, the other prospective markets include

the Middle East, latin America and the uK.

we are focused on strengthening our niche defence solutions backed by a portfolio of innovative products such as our family of infantry Fighting Vehicles, our Next Generation Armoured Fighting Vehicle platform, patrol vessels, 40mm munitions and weapon systems. we also have deep experience and engineering capability to design, build and integrate air, land and naval platforms.

Smart City: providing urgently needed solutions for municipal governments. To help our shareholders and investors better understand our focus, differentiation and strengths in Smart City, we have framed our solutions within three verticals: Smart Mobility, Smart Security and Smart Environment. These verticals are underpinned by enabling technologies and capabilities in cybersecurity, data analytics, digital connectivity, internet of things, satellite communications, robotics and autonomous systems. Many of these business lines are not new to ST Engineering as we now hold a track record of more than 500 Smart City projects across 70 cities around the world.

we have clear goals for our Smart City business, targeting to achieve $2b or more in revenue by 2022 from the $1b revenue generated in

2017. To get there, strategic partnerships in select areas and markets will be key building blocks to improving our channels. on this front, at the Group level, we have formed consortiums and signed several Memorandums of understanding (Mou), including with Surbana Jurong and Changi Airport Planners and Engineers to participate in overseas airport development projects; with Keppel urban Solutions to design and execute Smart City Masterplans in cities across Asia; and with JTC to design, develop and deploy an open Digital Platform for the Singapore Punggol Digital District.

we have also intensified our Smart City expansion plans in the u.S., Southeast Asia and the Middle East, engaging government authorities and decision makers, and we are actively looking at Smart City projects such as those targeted at infrastructural upgrades. our offerings will range from specific Smart City applications to more comprehensive end-to-end solutions. in addition, we have branded our integrated Smart City solutions suite as CitySense, aimed at addressing the mega-trend of urbanisation and targeting city planners who need customised, reliable and safe technology solutions that are weaved seamlessly into urban planning and development.

To help our shareholders and investors better understand our focus, differentiation and strengths in Smart City, we have framed our solutions within three verticals: Smart Mobility, Smart Security and Smart Environment.


we are on the right path to achieving our Smart City revenue target, backed by robust orders. Currently, the Electronics sector is the largest contributor to our suite of Smart City solutions but in time to come the land Systems sector will also contribute with its enhanced capabilities and offerings in robotics and autonomous systems.

building global Success. Today, business competition may stem from big and established enterprises or from start-ups with ingenious and disruptive business models. our five-year target to achieve two-thirds of our five-year growth revenue from outside Singapore was set with this knowledge. This calls for increased focus and efforts to leverage group scale to better position us to make a greater impact on the world stage.

The adoption of ST Engineering as our masterbrand, moving away from a portfolio of corporate brands, is a significant step taken to leverage group strength for greater impact. Most of our corporate brands were harmonised in June and the change for our u.S. businesses is expected to be completed in 2019. Going to market as one ST Engineering strengthens the cross-selling of our integrated solutions and facilitates deeper stakeholder engagement, which is especially important when entering new markets or segments. A stronger corporate brand also helps to attract and retain talent.

To thrive globally in the longer-term, we need to stay innovative and nimble. our strategy is to strengthen


collaborations with our industry partners such as Siemens, Cisco, ibM, Keppel and many others to capture new growth internationally or co-create new solutions to deliver greater value. on this front, our Mou for a Strategic Growth Partnership with the Singapore Economic Development board will catalyse growth opportunities as we jointly identify and develop growth strategies to build globally competitive businesses in selected industries for both ST Engineering and Singapore, beginning with robotics, smart mobility and health technology.

analytics and cybersecurity. These centres will provide group-wide support for our efforts to further differentiate our products and solutions. we are readying our workforce as well. our top 100 managers attended data analytics and cybersecurity executive workshops, leading to a mindset shift from the top. we also put our engineers through courses that are targeted at further enhancing their domain expertise in fast evolving areas such as cybersecurity, robotics and data analytics.

To support our global growth aspiration, we continue to focus on our people. on page 74, you will read about the significant progress we made in 2018 as part of our journey to build a global, future-ready and high-performing workforce.

our lifeblood: technology and innovation. in our previous letters to you, we discussed our focus on technology and innovation extensively and outlined how we have been gearing up to embrace industry 4.0. The year 2018 was no different as we continued our efforts to retool the Group for the challenges ahead. we set up two Strategic Technology Centres to develop deep capabilities in data

we recognise that we cannot build all our capabilities internally, hence the need for increased collaboration with external technology partners and institutes of higher learning to leverage each other’s expertise. our Corporate Venture Capital unit made four investments in promising technology start-ups with strong capabilities in data analytics, cybersecurity for rail transportation and autonomous vehicles, as well as in transportation technology. our open innovation lab continues to be an innovation exchange for our engineers to co-create and innovate ideas.

As we seek growth in our strategic thrusts, we

To thrive globally in the longer-term, we need to stay innovative and nimble. our strategy is to strengthen collaborations with our industry partners to capture new growth internationally or co-create new solutions to deliver greater value.

08 St engineeRing

will continue to hone our competitive strengths and prioritise initiatives central to our growth. when necessary, we will make tough decisions to streamline or rationalise our business portfolio. in doing so, we can sharpen our management focus, unlock value and recycle capital to strategic and growth businesses which can yield us better returns. our specialty vehicle business in india as well as the pilot training business in the u.S. are examples of businesses which no longer fit into our future growth plans, hence leading to their divestment.

StRengtHening MAnAgeMent benCH witH new poSitionS

in 2018, we created new management positions. we recruited a President of New Ventures and Enterprise to drive our advancement into new business areas such as health and medical technology. we also created a Chief Digital officer role to lead our digitalisation efforts and to support our increasing efforts to drive a ‘think digital think data’ culture.

in the u.S., General (Ret.) John Coburn who helmed our headquarters there for 17 years handed over his executive role to Tom Vecchiolla in December, while remaining as non-executive Chairman of our u.S. Advisory board. Tom, who possesses a wealth of experience in the defence industry, with 17 years in the private sector and 24 years in the public and military sectors, will work along the Management Committee to achieve our u.S. growth ambitions.

CoRpoRAte goveRnAnCe At tHe HeARt of ouR buSineSS

Good corporate governance continues to be at the heart of our businesses and this is a commitment shared by the board, the management team and all employees. As in the past, our Sustainability Report, from page 76 sets out the Group’s environmental, social and governance performance for the year.

we are pleased to report that as part of our continuous effort to enhance our governance structure, a new Risk and Assurance function overseeing governance, risk management and compliance will be formed in the second half of 2019.

boARd RenewAl And RejuvenAtion

As part of a continuous effort to renew and rejuvenate the board, several changes were made. olivia lum ooi lin retired as an independent non-executive Director in April. lG lim Cheng yeow Perry resigned as a non-independent non-executive Director — along with his Alternate Director, RADM Alan Goh Kim Hua — in May when he stepped down as the Chief of Defence Force, Ministry of Defence. Neo Kian Hong resigned in August as a non-independent non-executive Director when he stepped down as Permanent Secretary (Defence Development) in the Ministry of Defence. Dr Stanley lai Tze Chang resigned as an independent non-executive Director in late December.

lG ong Su Kiat Melvyn was appointed as a non-independent non-executive Director, with Col xu youfeng as his

Alternate Director in June. lim Chin Hu and Song Su-Min became independent non-executive Directors in July and September respectively.

we thank our former directors for their invaluable contributions and we look forward to working with our new directors as they expand the breadth and strength of our board.

ouR AppReCiAtion

we also want to take this opportunity to show our appreciation to our employees who, in their own way and collectively, have made us a better and stronger organisation. To our customers, business partners and shareholders, we look forward to your steadfast support as we continue our path of sustainable growth and value creation.

we firmly believe that ST Engineering’s best years are ahead of us. we are poised for sustained growth backed by the winning combination of our people, our strategy as well as our proven strengths in technology and innovation. we would like to thank you for believing in us and for joining us on this journey.

Sincerely,

kwA CHong SengChairman

vinCent CHongPresident & CEo


致股东的信

各位股东：

2018年，随着世界目睹并经历了科技如何颠覆现有业务、如何创造赢家和输家，对于工业4.0的讨论进一步升温。此外，中美贸易争端、英国退欧等政治发展带来的诸多不确定性也对世界经济增长产生了负面影响。

但身为一间科技、国防和工程集团，我们不仅强化了核心业务，也不断的推动变革以便在这科技日新月异的时代中获利。 2018年对我们来说是忙碌而获益不浅的一年，这都归功于我们实施的政策：为增长及可持续盈利奠定坚实的基础。

这一整年下来，虽然我们对短期市场的前景持谨慎态度，但我们并未受到季度业绩的过度影响。在2018财政年度末，我们不负众望, 取得一整套稳定的财务业绩，集团收入同比增长3％至67亿元。与2017年相比，税前利润（PbT）增长 1％至6.2亿元，股东应占利润（净利润）下降2％至4.94亿元。如果不是因为出现3700万元的一次性费用，本集团会取得同比增长7％的亮眼成绩。这些一次性费用是因为投资组合合理化，拟议收购MRA Systems （MRAS）的交易成本以及提前赎回MTN而产生的。如果也将2017年记录的2000万元的一次性有利美国税收调整排除在外，那么净利润将同比增长9％。在业务方面，宇航业务的收入同比增长4％至26.5亿元，净利润同比持平，为2.446亿元，原因是收购MRAS的相关费用被撤资收益部分抵消。电子业务的收入增长7％至21.4亿元，净利润增长10％至1.865亿元。尽管陆路系统业务收入同比增长了3％至12.8亿元，但由于今年并无上述前一年的一次性有利美国税收调整, 道路建设业务在印度撤资所造成的影响, 以及为巴西的

道路建设业务和车辆MRo业务支付了全部的减损费用, 其净利润同比下降39％至5290万元。在海事业务，虽然因为其美国业务的收益确认性下降而造成收入同比下降10％至5.74亿元, 但其净利润却因为新加坡业务的表现良好而增长了67％至4520万元。

我们在各业务范围、地理位置和客户类型方面，继续保持了收入来源的多元化。宇航业务收入组合占39％、电子业务占32％、陆路系统占19％、海事业占9％。在地理位置上，包括新加坡在内的亚洲业务部门对集团收益贡献了73％，而我们在美国和欧洲的业务部门分别占集团收益的 18％和8％。商业和国防业务销售收入分成69％：31％。

我们以总价值高达132亿元的订单额完美的为2018年画上句号，保障了集团未来几年的稳健收益。 2019年，我们预期将从订单中获得49亿元的收益。

2018年，我们花费了大约3.35亿元用于资本支出，比2017年的支出多出约23％。这笔支出的很大一部分用于扩大产能以支持增长机会，例如在宇航业务方面，我们在德国建立了新复合材料制造工厂和新飞机库，在电子业务方面，我们对位于新加坡西部的办公楼展开了一次主要的扩建工程。我们还为我们的飞机租赁业务购买了两架飞机。

用现金提早赎回了MTN之后，我们的现金及现金等价余额约为4.14亿元。我们始终致力于现金流的最大化、维持资本管理控制和提高价值与回报。

对于股东，董事会已建议派发每股 10.0分的末期股息。连同2018年8月支付的每股5.0分的中期股息，全年的股息总额将为每股15.0分。根据2018年和2017年最后交易日的平均收盘价来计算，股息收益率为4.4％。

五年计划：明确的重点和战略

为了实现成为全球科技、国防与工程产业佼佼者的长远期望, 我们在三月份分享了由我们持续从长远的观点评量营运及资本配置规划。

我们的五年计划(2018-2022)制定了明确的目标和策略。如同在第30页介绍的，我们计划在增长并强化核心业务的同时也积极寻求新商机，特别是在国际国防业务和智能城市这两个领域。我们将持续投入资源来培养人才、强化企业文化及全球营销与客户网络、研发尖端科技并鼓励技术创新、加强财务实力等关键资产与能力。

我们设定的四大目标包括将智能城市业务的营收在2022年前翻番至超过20亿元、核心及其他业务领域的年复合增长率能达到全球国内生产总值年增长率的二至三倍、三分之二的集团总营收增长来自海外市场及净利能与营收齐步增长。

我们以总价值高达132亿元的订单额完美的为2018年画上句号，保障了集团未来几年的稳健收益。

10 St engineeRing

我们非常专注于执行这项计划，并在此通过这份报告书让股东对于计划的发展蓝图有更清楚的了解。有关我们2018年在四个核心业务取得的进展及成绩，请参阅第36至59页的“运营评鉴与展望”以获取更多详情。

要强化核心业务，我们必须打造具有全球竞争力、高辨识度并有潜力扩大商业规模的业务线。

在这方面，我们纯熟的宇航业务已享有稳固的市场定位。我们在2018年再度获得Aviation 100全球飞机维修大奖的年度整体维修服务商奖，奠定了我们机身维修业务世界第一的名次。我们在机身、引擎和组件维修服务方面的核心业务持续表现优异，这促使我们进一步在中国及美国扩充产能。我们继续保持客货机改装业务的领导地位，如今已达成A330和 A320/A321改装计划的严格要求及里程碑。我们的客货机改装项目在营销、原型开发及交付给客户方面的目标均已顺利达成。

造船及船舶维修依然是本集团的核心业务。我们是全球少数能为船东提供全面解决方案的船厂，包括船舶设计、建造、系统安装或合成、改装、升级和维修等服务。这独特优势使本集团在商业与国防业务领域取得突出的成就。强化海事业务的运营及盈利能力和追加订单量是我们2018年的重点工作。海事业务的表现的确已获得改善，不论是财务绩效或订单量都已见好转，显现出我们海事业务的实力、能力及抗逆力。

我们致力于拓展我们的战略业务线，并寻找对本集团营收获利及竞争力有益的收购标的。收购MRAS这项即高价值又富有知识产权的互补业务令我们

感到非常振奋。 MRAS的加入将使我们的宇航业务能够切入高价值组件的原始设备制造领域，在价值链中更上一层楼。这是我们迄今为止最大的一笔收购案，可望在成交后的第一年就为本集团及宇航业务的营收带来增值效应。

国防业务：扩大国际业务为日后发展奠定基础。我们将持续提高本集团在国防业务领域的竞争力。我们目前着重于加强我们特有的国防全面方案和研发创新产品组合，例如步兵作战车、新一代装甲战车、巡逻艇、40mm 弹药和武装系统。我们对于设计、建造及整合海、陆、空平台，同样具备丰富的经验与深厚的工程能力。我们也将会采取各种备选方案扩大国际出口, 如寻求本地化生产或产能投资、缔结更多合资协议、授权与技术转移等。

在参与竞标美国海军陆战队ACV 1.1及美国陆军Mobile Protected Firepower这两项项目的过程中，我们吸取了许多宝贵经验可供我们作为日后竞标的参考。我们成功地与美国海军签订了两份合同，也赢得为一个海外政府设计及建造两艘物流供应船的合同。这让我们更积极加入全球各大国防市场的竞争，并更有信心赢得胜利。除了美国以外，其他潜在市场包括中东、拉丁美洲及英国。

智能城市：为市级政府提供迫切需要的解决方案。为使股东们更容易了解本集

要强化核心业务，我们必须打造具有全球竞争力、高辨识度并有潜力扩大商业规模的业务线。

团在智能城市业务领域的发展重点、辨识策略与市场优势，我们特别将智能城市的发展重点分为智能移动、智能安全及智能环境三大垂直行业。网络安全、数据分析、数据连接、物联网、卫星通讯、机器及自主系统方面的技术将遍布各个垂直行业的业务和平台。至今，我们已在全球 70个城市部署了超过500项智能城市方案。

我们为智能城市业务定下了明确的目标，计划将其营收从2017年的10亿元在2022年前翻番至20亿元。为达成这个目标，我们将在特定地区与市场建立战略合作伙伴关系，作为强化通路的重要手段。为此，我们缔结联盟并签订了几个合作备忘录，包括与Surbana Jurong和Changi Airport Planners and Engineers合作参与外国机场发展项目，与 Keppel urban Solutions一同设计、规划与执行亚洲多个城市的智能城市总蓝图，以及与JTC合作设计、开发及部署榜鹅数码园区的开放智能平台。

我们还加紧推动在美国、东南亚及中东与政府当局合作的智能城市拓展计划，并积极寻求机会参与以基础建设升级为目的的智能城市项目。我们提供的服务将从特定智能城市应用到全方位的端对端解决方案。此外，为因应都市化的大趋势，我们还为集团旗下的整合式智能城市解决


方案配套推出全新品牌CitySense。目标客群锁定需要可靠、安全并能与都市计划和开发项目无缝衔接的定制解决方案的城市规划人员。

我们继续往智能城市营收目标的道路上前进。我们至今承接的订单包括了规模较大的智能城市相关项目。目前，电子业务仍占智能城市营收的最大比例，但尔后陆路系统业务也将凭藉其在机器技术和自主系统领域的实力及新增产品带来营收贡献。

我们如今的商业竞争对手大有改变。除了大型的老牌企业，也有商业手法巧妙及拥有突破性商业模式的新创公司。若要达成五年计划中三分之二营收增长来自海外市场的目标，我们更须凭借集团独有的跨业务工程科技、技术和资源提高我们在国际市场的辨识度和竞争力，扩展知名度。

舍弃多品牌策略，以ST Engineering作为集团主要品牌，是运用集团优势提高影响力的重要一步。集团旗下大部分的品牌都已在六月份完成整合，美国业务的变革订于2019年完成。以单一品牌进军市场，不仅能利用交叉销售提高整合式解决方案的业绩，还能深化利害关系人的参与，这在我们进入新市场或业务领域时尤其重要。更为强大的公司品牌也有助我们吸引及留住人才。

为了在全球市场中创造长久的荣景，我们需要保持敏捷并持有不断创新的能力。我们的战略是与Siemens、 Cisco、ibM、Keppel等业界头公司建立合作伙伴关系，以抓住世界各地的新增长机会，或共创能缔造更高价值的新解决方案。为此，我们与新加坡经济发展局签署了合作备忘录，双方将密切

合作，物色一些行业例如机器技术、智能移动和保健科技等，制定增长策略以及进行发展。

致力于培养和训练人才仍是集团非常重视的一项要务。您可以在第74页了解我们在2018年打造全球化高绩效未来人才的道路上取得的重要进展。

在之前的致股东报告书中，我们已讨论技术与创新对集团的重要性，并大略讲述了我们要如何加速向工业4.0转型。在2018年，集团同样为了迎接挑战而努力更新调整。我们成立了两个战略科技中心，以强化我们在数据分析与网络安全方面的能力。这两个中心将作为整个集团的后盾，协助我们进一步加强产品与解决方案的辨识度。除此之外，本集团的100名主管参加数据分析与网络安全研讨会，希望从上而下带动员工思维的转变。我们还为工程师安排课程，以进一步强化他们在网络安全、机器技术及数字化等快速发展领域的专业能力。

我们体认到不能单凭内部强化能力，我们还需要与外部的技术合作伙伴与高等教育机构协同合作，以达到彼此取长补短的互利成效。我们通过创业基金投资于四间前景可期的科技新创公司。这四间公司分别具有数据分析、铁路运输网络安全、无人驾驶车及运输科技方面的技术或能力。我们的开放创新实验室也持续为工程师提供一个共同创造及发想创意的交流平台。

舍弃多品牌策略，以ST Engineering作为集团主要品牌，是运用集团优势提高影响力的重要一步。

随着我们的增长策略转向战略进攻模式，我们将持续强化我们的竞争实力并优先实施对增长有利的计划。必要时，我们将做出精简或梳理业务线的艰难决定。因为唯有如此，我们才能强化业务重点、并且使资金回流到能创造更高价值与回报率的战略增长领域。我们在印度的特种车辆业务以及在美国的飞行训练业务，都是因为不符合未来的增长计划而需要撤资的范例。

通过新职位强化管理团队

我们在2018年设立了新的管理职位。我们招聘了一位新业务与创业总裁来拓展如医疗保健科技的业务领域。我们还设置了一位首席数码业务总监，负责带领集团进行数字化转型，并为我们积极打造的‘数字及数据思维’文化。

掌管美国总部达17年的退役将军 John Coburn 已在十二月将职权交给 Tom Vecchiolla，但仍续任美国咨询委员会的非执行董事长一职。 Tom拥有丰富的国防工业从业经验，曾在私人公司任职17年，并在公共和军事部门工作 24年，他将与管理委员会一同携手达成我们在美国的增长目标。

企业管治为我们业务发展的关键

良好的企业管治架构仍然是集团永续发展的关键，同时也是董事会、管理

致股东的信12 St engineeRing

团队及所有员工必须共同遵守的约定。与往年一样，我们的可持续发展报告从第76页起列明了本集团今年度的环境、社会和治理表现。

为确保企业管治架构更加健全完善，我们即将在2019年下半年设置一个风险审计新部门,专门负责监督公司治理、风险管理与法令遵循情况。

董事会更新与振兴

为了持续更新董事会的成员，我们做了一些人事更动。林爱莲女士已在四月份卸下独立非执行董事一职。林清耀中将在在五月份卸下国防部三军总长的职务后也连同其代任董事吴钦华少将卸下非独立非执行董事一职。梁建鸿先生在卸下国防部常任秘书（国防发展）的职务后，同时在八月份卸下非独立非执行董事一职。黎智昌博士在十二月底卸下独立非执行董事一职。

王赐吉中将在六月份被任命为非独立非执行董事，并由许友丰上校担任其代任董事。林振富与宋素绵分别在七月及九月成为独立分执行董事。

我们在此向各位董事会的前任董事们致上最深的谢意，感谢他们的宝贵贡献，并在此期许我们的新任董事能够为董事会带来新的气象。

致谢

我们也借此机会向我们的员工致谢，感谢他们为集团的发展所做的贡献。在迈向可持续增长及价值创造的道路上，我们希望客户、业务合作伙伴与股东们能继续给予我们坚定的支持。

我们坚信ST Engineering更辉煌的时代即将到来。我们将凭藉我们人才、战略与科技创新实力，创造集团的可持续增长。感谢各位对我们的信任与这一路以来的陪伴。

此致,

柯宗盛主席

钟思峰总裁兼首席执行长


boARD oF DiRECToRS

The names of the directors holding office at the date of this report are set out here together with details of their academic and professional qualifications, age, date of first appointment as Director, date of last re-election as Director, as well as other directorships and principal commitments.

* listed on the SGx-ST

kwA CHong SengCHAiRMANNoN-ExECuTiVE iNDEPENDENT DiRECToR

Date of first appointment as a Director:1 September 2012

Date of appointment as Chairman: 25 April 2013

Date of last re-election as a Director: 20 April 2018

kwa Chong Seng, 72, is Chairman of ST Engineering. He has more than 40 years’ experience in the petroleum industry having served as Chairman and Managing Director of ExxonMobil Asia Pacific Pte. ltd. before retiring in 2011. Chong Seng is currently the Chairman of Singapore Exchange limited* and Deputy Chairman of the Public Service Commission, Singapore. He also serves on the board of SeaTown Holdings Pte. ltd. and is a member of the Defence Science & Technology Agency (DSTA). Chong Seng is also the Chairman of the Advisory Committee of Dymon Asia Capital ltd. He graduated from the former university of Singapore with a Mechanical Engineering degree. Chong Seng was awarded the Distinguished Engineering Alumni Award by the National university of Singapore (NuS) in 1994 and is a Fellow of the Academy of Engineering Singapore. in 1999, he was conferred the Honorary Ningbo Citizenship. Chong Seng was awarded the Singapore Public Service Star in 2005 and the Singapore Public Service Star (bar) in 2016.

vinCent CHong Sy fengPRESiDENT & CEoExECuTiVE DiRECToR

Date of first appointment as a Director:1 october 2016

Due for re-election at the 2019 AGM under article 100 of the Company’s Constitution

vincent Chong, 49, is the President & Chief Executive officer (CEo) of ST Engineering. He joined ST Engineering Group in April 2014, first as President of Strategic Plans & business Development at the Aerospace sector and later as the Group’s Deputy CEo (Corporate Development) before his appointment as President & CEo of ST Engineering. Vincent had a 20-year global career in the petroleum industry holding a variety of technical, operations and senior management positions from refining & supply, product marketing, to strategic planning. He is a board member of JTC Corporation and also a member of the Ministry of Trade and industry’s international Advisory Panel for Advanced Manufacturing & Engineering. Vincent graduated with First Class Honours in Mechanical Engineering from NuS. He has also attended executive leadership programmes at the Thunderbird School of Global Management and the Columbia business School.

14 St engineeRing

quek See tiat, 64, is President of the Council for Estate Agencies. Prior to this, he was Chairman of the building and Construction Authority, Singapore until 31 March 2016. He retired as Deputy Chairman of PricewaterhouseCoopers Singapore in 2012, after a career in the firm that spanned 31 years. See Tiat is a board member of Singapore Press Holdings ltd*, Temasek Foundation Connects ClG limited and the Monetary Authority of Singapore. He was conferred the Public Service Medal in 2009 and the Public Service Star in 2014. See Tiat holds a bachelor of Science (Economics) (Honours) from the london School of Economics and Political Science, and is a Fellow of the institute of Chartered Accountants in England and wales.

lg ong Su kiat Melvyn, 43, is the Chief of Defence Force in Singapore’s Ministry of Defence (MiNDEF). lG ong joined the Singapore Armed Forces (SAF) in 1994 and has held a broad range of staff command appointments in the course of his military career. He also served as the Deputy CE of the Early Childhood Development Agency from 2013 to 2014. lG ong is currently a board member of JTC Corporation. He holds a bachelor of Science (Economics) (Honours) and a Master of Science (Development Studies) from the london School of Economics and Political Science.

quek See tiAtNoN-ExECuTiVE iNDEPENDENT DiRECToR

Date of first appointment as a Director:1 July 2013


lieutenAnt-geneRAl ong Su kiAt MelvynNoN-ExECuTiVE DiRECToR

Date of first appointment as a Director:8 June 2018


quek giM pewNoN-ExECuTiVE DiRECToR

Date of first appointment as a Director:15 August 2016


quek gim pew, 61, is the Chief Defence Scientist of MiNDEF. Prior to this, he was CEo of DSo National laboratories (DSo). Gim Pew is the Chairman of ATREC Pte ltd, Governing board for the Centre for Quantum Technologies and Temasek Defence Systems institute Management board (NuS). He is also a member of DSo, the Agency for Science, Technology & Research board, SMRT Trains ltd and DSTA. Gim Pew holds a bachelor of Engineering (First Class Honours) (Electrical Engineering) from NuS and a Master of Science (Distinction) in Electrical Engineering from the Naval Postgraduate School, uSA. He is a Fellow of The Academy of Engineering Singapore.

* listed on the SGx-ST


boARD oF DiRECToRS

kHoo boon HuiNoN-ExECuTiVE iNDEPENDENT DiRECToR



khoo boon Hui, 64, is a Senior Fellow of the Home Team Academy and the Civil Service College. Prior to this, he was Senior Fellow of the Ministry of Home Affairs (MHA) and Senior Advisor, MHA until 30 November 2016 and 20 January 2016 respectively. boon Hui was appointed Commissioner of the Singapore Police Force (SPF) in July 1997, and relinquished this post in January 2010 after serving 32 years in the SPF to become Senior Deputy Secretary, MHA till January 2015. He was also the President of iNTERPol from 2008 to 2012. boon Hui is currently Chairman of Singapore island Country Club and a board member of Singapore Health Services Pte ltd, Ministry of Health Holdings, the Casino Regulatory Authority, Certis CiSCo, Ensign infosecurity Pte ltd and Temasek Foundation international ClG limited. He is a Senior Advisory board member of Cognifyx Pte ltd, a member of the Palo Alto Networks Public Sector Advisory Council and the board Financial Crime Risk Committee of Standard Chartered bank. boon Hui is also a Commissioner of the Global Commission on the Stability of Cyberspace. He holds a bachelor of Arts (Engineering Science & Economics) degree from oxford university and a Master in Public Administration from the Harvard Kennedy School of Government. boon Hui also attended the Advanced Management Program at the wharton School.

dR beH SwAn ginNoN-ExECuTiVE iNDEPENDENT DiRECToR



dr beh Swan gin, 51, is Chairman of the Singapore Economic Development board (EDb). Prior to this, he was Permanent Secretary of the Ministry of law from 1 July 2012 to 30 November 2014. Dr beh serves as Chairman of EDbi Pte ltd and EDb investments Pte ltd, and is also a Director of Ascendas-Singbridge Pte. ltd., Enterprise Singapore, Human Capital leadership institute Pte ltd and Temasek Foundation Connects ClG limited. He is a medical doctor by training and graduated from NuS. in addition, Swan Gin is a Sloan Fellow with a Master of Science in Management from Stanford university’s Graduate School of business, and completed the Advanced Management Program at the Harvard business School in 2012.

16 St engineeRing

lim Sim Seng, 60, is currently the Group Head of Consumer banking Group & wealth Management of DbS and Chairman of DbS Vickers Securities Holdings Pte ltd. Sim Seng was a senior banker for 26 years with Citibank before joining DbS in 2010 as Country Head, DbS Singapore. with Citigroup/Citibank, he served Citigroup in various senior appointments in Kuala lumpur, Tokyo, New york, Saudi Arabia, Singapore and Hong Kong. He is the Chairman of Singapore land Authority. Sim Seng is a Director of DbS Securities (Japan) Company limited and Nikko Asset Management Co., ltd. He serves as the Singapore’s High Commissioner (Non Resident) to the Federal Republic of Nigeria. He was a Japanese Government Monbusho scholar and graduated with a bachelor in business Administration from yokohama National university, Japan.

lim Ah doo, 69, was formerly the President and subsequently the non-executive Vice Chairman of RGE Pte ltd. Ah Doo’s past working experience includes an 18-year banking career in Morgan Grenfell from 1977 to 1995, during which he held several key positions including that of Chairman of Morgan Grenfell (Asia) limited. He is the Chairman of olam international limited* and also an independent Director of GP industries ltd*, u Mobile Sdn bhd, GDS Holdings limited# and STT GDC Pte. ltd. Ah Doo graduated with an honours degree in Engineering from the Queen Mary College, university of london and a Master in business Administration from the Cranfield School of Management.

liM SiM SengNoN-ExECuTiVE iNDEPENDENT DiRECToR

Date of first appointment as a Director:15 May 2015


liM AH dooNoN-ExECuTiVE iNDEPENDENT DiRECToR

Date of first appointment as a Director:10 November 2015


liM CHin HuNoN-ExECuTiVE iNDEPENDENT DiRECToR

Date of first appointment as a Director:16 July 2018


lim Chin Hu, 60, has over 30 years of experience in the info-communications industry. He was formerly CEo of Frontline Technologies & british Telecoms South East Asia. Chin Hu held management positions in Hewlett-Packard Singapore and Managing Director of Sun Microsystems Pte ltd (now oracle). He is a Director of Kulicke & Soffa inc#, Singapore Exchange limited*, Citibank Singapore limited, Heliconia Capital Management Pte ltd and Singapore Health Services Pte ltd. Chin Hu holds a bachelor of Science from la Trobe university, Melbourne, Australia and is a Fellow of the Singapore institute of Directors.

* listed on the SGx-ST# listed on the Nasdaq Stock Market


boARD oF DiRECToRS

Song Su-Min NoN-ExECuTiVE iNDEPENDENT DiRECToR



Song Su-Min, 45, is a Partner of Allen and Gledhill llP. Su-Min was admitted to the Singapore bar in 1997 and the bar of England and wales, Middle Temple in 1996. She specialises in single and multi-jurisdictional mergers and acquisitions, domestic and international joint ventures and corporate restructuring, and advises generally on corporate and commercial law. Su-Min has substantial experience in advising private equity firms on their take-private transactions, and companies in their venture capital fund raisings. She is recognised as a noted practitioner in Corporate/M&A by Chambers Asia-Pacific and noted for her work in other publications such as The legal 500 Asia Pacific and iFlR1000. Su-Min obtained her law degree from the university of Kent at Canterbury.

Colonel xu youfeng

AlTERNATE DiRECToR To liEuTENANT-GENERAl oNG Su KiAT MElVyN

Date of appointment as an Alternate Director:8 June 2018

Col xu youfeng, 36, is Commander, 7th Singapore infantry brigade of SAF. youfeng has held various command and staff positions in MiNDEF since 2001. He was awarded the President’s cum SAF overseas Scholarship. youfeng holds a Master of Science with Distinction in optics and Photonics, (Science) from the imperial College of Science, Technology & Medicine, university of london, uK.

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pASt diReCtoRSHipS in tHe lASt tHRee yeARS

* listed on the SGx-ST@ listed on the Australian Securities Exchange

kwA CHong Seng– APl (bermuda) ltd.– APl Co. Pte ltd– APl limited– Automar (bermuda) ltd.– Delta Topco limited– Neptune orient lines limited – Nol liner (Pte.) ltd– olam international limited*

vinCent CHong Sy feng– Singapore Technologies

Dynamics Pte ltd– ST Aerospace Resources

Pte. ltd.– ST Engineering Aerospace ltd.– ST Engineering Electronics ltd.– ST Engineering land Systems

ltd.– ST Engineering Management

Services Pte. ltd.– ST Engineering Marine ltd.

quek See tiAt– building and Construction

Authority– Energy Market Authority– Neptune orient lines limited

lieutenAnt-geneRAl ong Su kiAt Melvyn– ST Engineering

land Systems ltd.

quek giM pew– ST Electronics

(Satellite Systems) Pte. ltd.– Temasek laboratories@

NuS Management board– Temasek laboratories@

NTu Management board– Temasek laboratories@

SuTD Management board

kHoo boon Hui– Quann world Pte ltd– international Centre for

Sport Security– TechTrace Advisory board

(Switzerland)– The international Advisory board

of Policing: A Journal of Policy and Practice (uK)

dR beH SwAn gin– Esplanade Co. ltd– Human Capital leadership institute

(now known as Agilead limited)– ST Engineering Electronics ltd.

liM SiM Seng– ASEAN Finance Corporation limited– ST Engineering Aerospace ltd.

liM AH doo– bracell limited– SembCorp Marine limited*– SM investments Corporation– ST Engineering Marine ltd.

liM CHin Hu– Changi General Hospital Pte ltd– Keppel DC REiT– Personal Data Protection

Commission– Telstra Corporation limited@


ADDiTioNAl iNFoRMATioN oN DiRECToRS SEEKiNG RE-ElECTioN

vinCent CHong Sy feng liM SiM Seng liM AH doo lg ong Su kiAt Melvyn liM CHin Hu Song Su-Min

date of Appointment 1 october 2016 15 May 2015 10 November 2015 8 June 2018 16 July 2018 16 September 2018

date of last Re-appointment (if applicable) 21 April 2017 21 April 2016 21 April 2016 NA NA NA

Age 49 60 69 43 60 45

Country of principal residence Singapore Singapore Singapore Singapore Singapore Singapore

the board’s comments on this appointment (including rationale, selection criteria, and the search and nomination process)

Vincent has 20 years of global business and management experience. His leadership will continue to benefit ST Engineering and set the direction of growth for the ST Engineering Group.

Sim Seng has vast experience in banking and management. His experience will continue to enhance board deliberations.

Ah Doo has vast experience in finance, investment and management. His experience will continue to enhance board deliberations.

Melvyn’s defence background will continue to benefit ST Engineering in addressing the changing and challenging needs of the defence business.

Chin Hu has vast experience in business and management and in nurturing technology startups. His experience and knowledge will continue to help management steer towards the Company’s growth vision.

Su-Min’s legal background will continue to provide a specialised legal perspective to board deliberations.

whether appointment is executive, and if so, the area of responsibility

The position is executive in nature. Mr Chong oversees the business of the ST Engineering Group.

Non-executive Non-executive Non-executive Non-executive Non-executive

job title (e.g. lead id, AC Chairman, AC Member etc.)

President & CEo and Executive Director

independent Director independent Director and Member of Audit Committee

Non-independent Director independent Director independent Director and Member of Audit Committee

professional qualifications First Class Honours in Mechanical Engineering from the National university of Singapore Executive leadership programmes at the Thunderbird School of Global Management and the Columbia business School

Japanese Government Monbusho scholar and graduated with a bachelor in business Administration from yokohama National university, Japan

Honours degree in Engineering from the Queen Mary College, university of londonMaster in business Administration from the Cranfield School of Management

Master of Science, (Science) from the london School of Economics & Political Science, university of london, uK

bachelor of Science from la Trobe university, Melbourne, AustraliaDiploma in Electrical & Electronics Engineering from Ngee Ann Polytechnic

llb (Honours) from the university of Kent at Canterbury

working experience and occupation(s) during the past 10 years

President & CEo, ST Engineering (2016 – current)President & CEo (Designate), ST Engineering (2015 – 2016)Dy CEo (Corporate Development), ST Engineering (2014 – 2015)President, Strategic Plans & business Development, ST Aerospace (2014)Director, Asia Pacific lubricants Sales, ExxonMobil Asia Pacific Pte ltd (2013 – 2014)Downstream Senior Advisor, Corporate Strategic Planning, Exxon Mobil Corporation (2012 – 2013)Global Director, Marine Fuels, ExxonMobil Marine limited (2009 – 2012)

Group Head, Consumer banking Group & wealth Management, DbS (2019 - current)Group Executive, Country Head, DbS Singapore (2010 - 2018) and Chairman/board Director, DbS Vickers Securities Holdings Pte ltd (2010 – current)President, CEo & board Director, Nikko Citi Holdings, inc (2008 – 2009)Country officer, Citibank Hong Kong and Chairman, Citibank Hong Kong limited (2007 – 2008)

Acting President, AAA oils and Fats Pte ltd (2007 – 2007)

President, RGE Pte ltd (2003 – 2007)

SAF officer (1994 – current)

CEo, british Telecoms South East Asia (2008 – 2011) CEo, Frontline Technologies Corp. ltd (2000 – 2008)

Partner, Allen & Gledhill llP(2006 – current)

20 St engineeRing


date of Appointment 1 october 2016 15 May 2015 10 November 2015 8 June 2018 16 July 2018 16 September 2018

date of last Re-appointment (if applicable) 21 April 2017 21 April 2016 21 April 2016 NA NA NA

Age 49 60 69 43 60 45

Country of principal residence Singapore Singapore Singapore Singapore Singapore Singapore

the board’s comments on this appointment (including rationale, selection criteria, and the search and nomination process)

Vincent has 20 years of global business and management experience. His leadership will continue to benefit ST Engineering and set the direction of growth for the ST Engineering Group.

Sim Seng has vast experience in banking and management. His experience will continue to enhance board deliberations.

Ah Doo has vast experience in finance, investment and management. His experience will continue to enhance board deliberations.

Melvyn’s defence background will continue to benefit ST Engineering in addressing the changing and challenging needs of the defence business.

Chin Hu has vast experience in business and management and in nurturing technology startups. His experience and knowledge will continue to help management steer towards the Company’s growth vision.

Su-Min’s legal background will continue to provide a specialised legal perspective to board deliberations.

whether appointment is executive, and if so, the area of responsibility

The position is executive in nature. Mr Chong oversees the business of the ST Engineering Group.

Non-executive Non-executive Non-executive Non-executive Non-executive

job title (e.g. lead id, AC Chairman, AC Member etc.)

President & CEo and Executive Director

independent Director independent Director and Member of Audit Committee

Non-independent Director independent Director independent Director and Member of Audit Committee

professional qualifications First Class Honours in Mechanical Engineering from the National university of Singapore Executive leadership programmes at the Thunderbird School of Global Management and the Columbia business School

Japanese Government Monbusho scholar and graduated with a bachelor in business Administration from yokohama National university, Japan

Honours degree in Engineering from the Queen Mary College, university of londonMaster in business Administration from the Cranfield School of Management

Master of Science, (Science) from the london School of Economics & Political Science, university of london, uK

bachelor of Science from la Trobe university, Melbourne, AustraliaDiploma in Electrical & Electronics Engineering from Ngee Ann Polytechnic

llb (Honours) from the university of Kent at Canterbury

working experience and occupation(s) during the past 10 years

President & CEo, ST Engineering (2016 – current)President & CEo (Designate), ST Engineering (2015 – 2016)Dy CEo (Corporate Development), ST Engineering (2014 – 2015)President, Strategic Plans & business Development, ST Aerospace (2014)Director, Asia Pacific lubricants Sales, ExxonMobil Asia Pacific Pte ltd (2013 – 2014)Downstream Senior Advisor, Corporate Strategic Planning, Exxon Mobil Corporation (2012 – 2013)Global Director, Marine Fuels, ExxonMobil Marine limited (2009 – 2012)

Group Head, Consumer banking Group & wealth Management, DbS (2019 - current)Group Executive, Country Head, DbS Singapore (2010 - 2018) and Chairman/board Director, DbS Vickers Securities Holdings Pte ltd (2010 – current)President, CEo & board Director, Nikko Citi Holdings, inc (2008 – 2009)Country officer, Citibank Hong Kong and Chairman, Citibank Hong Kong limited (2007 – 2008)

Acting President, AAA oils and Fats Pte ltd (2007 – 2007)

President, RGE Pte ltd (2003 – 2007)

SAF officer (1994 – current)

CEo, british Telecoms South East Asia (2008 – 2011) CEo, Frontline Technologies Corp. ltd (2000 – 2008)

Partner, Allen & Gledhill llP(2006 – current)



Shareholding in St engineering and its subsidiaries

ST Engineering- 1,568,084 shares- up to 1,287,580

Performance Shares* - 77,867 unvested

Restricted Shares**- 180,800 Restricted Shares**

* granted under the ST Engineering Performance Share Plan 2010

** granted under the ST Engineering Restricted Share Plan 2010

35,600 shares in ST Engineering 60,000 shares in ST Engineering Nil 20,000 ordinary shares in ST Engineering held in trust by Citibank Nominees

Nil

Any relationship (including immediate family relationships) with any existing director, existing executive officer, St engineering and/or substantial shareholder of St engineering or of any of its principal subsidiaries

No No No No No No

Conflict of interest (including any competing business) No No No No No No

undertaking (in the format set out in Appendix 7.7) under Rule 720(1) has been submitted to St engineering

yes yes yes yes yes yes

other principal Commitments including directorships – past (for the last 5 years)

directorshipsSingapore Technologies Dynamics Pte ltdST Aerospace Resources Pte. ltd.ST Engineering Aerospace ltd.ST Engineering Electronics ltd.ST Engineering land Systems ltd.ST Engineering Management Services Pte. ltd.ST Engineering Marine ltd.

other principal CommitmentsPlease see “working Experience and occupation(s) during the past 10 years” above

directorshipsASEAN Finance Corporation limitedST Engineering Aerospace ltd.Asfinco Singapore limited


directorshipsbracell limitedSembCorp Marine limitedSM investments CorporationST Engineering Marine ltd.


directorshipsST Engineering land Systems ltd.


directorshipsTelstra limitedKeppel DC REiTChangi General Hospital Pte ltd


directorshipsJurong international Holdings Pte ltd



22 St engineeRing


Shareholding in St engineering and its subsidiaries

ST Engineering- 1,568,084 shares- up to 1,287,580

Performance Shares* - 77,867 unvested

Restricted Shares**- 180,800 Restricted Shares**

* granted under the ST Engineering Performance Share Plan 2010

** granted under the ST Engineering Restricted Share Plan 2010

35,600 shares in ST Engineering 60,000 shares in ST Engineering Nil 20,000 ordinary shares in ST Engineering held in trust by Citibank Nominees

Nil

Any relationship (including immediate family relationships) with any existing director, existing executive officer, St engineering and/or substantial shareholder of St engineering or of any of its principal subsidiaries

No No No No No No

Conflict of interest (including any competing business) No No No No No No

undertaking (in the format set out in Appendix 7.7) under Rule 720(1) has been submitted to St engineering

yes yes yes yes yes yes

other principal Commitments including directorships – past (for the last 5 years)

directorshipsSingapore Technologies Dynamics Pte ltdST Aerospace Resources Pte. ltd.ST Engineering Aerospace ltd.ST Engineering Electronics ltd.ST Engineering land Systems ltd.ST Engineering Management Services Pte. ltd.ST Engineering Marine ltd.


directorshipsASEAN Finance Corporation limitedST Engineering Aerospace ltd.Asfinco Singapore limited


directorshipsbracell limitedSembCorp Marine limitedSM investments CorporationST Engineering Marine ltd.


directorshipsST Engineering land Systems ltd.


directorshipsTelstra limitedKeppel DC REiTChangi General Hospital Pte ltd


directorshipsJurong international Holdings Pte ltd




other principal Commitments including directorships – present

directorshipsExperia Events Pte. ltd.SP Telecommunications Pte ltdST Engineering Treasury Pte. ltd.Vision Technologies Systems inc

other principal Commitments JTC Corporation – board Member/Member of Development CommitteePlease also see “working Experience and occupation(s) during the past 10 years” above

directorshipsDbS Securities (Japan) Company limitedDbS Vickers Securities Holdings Pte ltdNikko Asset Management Co., ltdSingapore land Authority

other principal CommitmentsFederal Republic of Nigeria – High CommissionerPlease also see “working Experience and occupation(s) during the past 10 years” above

directorshipsGDS Holdings limitedGP industries ltdolam international limitedSTT GDC Pte. ltd.u Mobile Sdn bhdVirtus HoldCo limited

other principal CommitmentsNil

directorshipsNil

other principal CommitmentsJTC Corporation – board MemberPlease also see “working Experience and occupation(s) during the past 10 years” above

directorshipsCitibank Singapore limitedHeliconia Capital Management Pte ltdKulicke & Soffa incSingapore Exchange limitedSingapore Health Services Pte ltd

other principal CommitmentsPlease also see “working Experience and occupation(s) during the past 10 years” above

directorshipsNil



24 St engineeRing


other principal Commitments including directorships – present

directorshipsExperia Events Pte. ltd.SP Telecommunications Pte ltdST Engineering Treasury Pte. ltd.Vision Technologies Systems inc

other principal Commitments JTC Corporation – board Member/Member of Development CommitteePlease also see “working Experience and occupation(s) during the past 10 years” above

directorshipsDbS Securities (Japan) Company limitedDbS Vickers Securities Holdings Pte ltdNikko Asset Management Co., ltdSingapore land Authority

other principal CommitmentsFederal Republic of Nigeria – High CommissionerPlease also see “working Experience and occupation(s) during the past 10 years” above

directorshipsGDS Holdings limitedGP industries ltdolam international limitedSTT GDC Pte. ltd.u Mobile Sdn bhdVirtus HoldCo limited

other principal CommitmentsNil

directorshipsNil

other principal CommitmentsJTC Corporation – board MemberPlease also see “working Experience and occupation(s) during the past 10 years” above

directorshipsCitibank Singapore limitedHeliconia Capital Management Pte ltdKulicke & Soffa incSingapore Exchange limitedSingapore Health Services Pte ltd

other principal CommitmentsPlease also see “working Experience and occupation(s) during the past 10 years” above

directorshipsNil



vinCent CHong Sy feng

liM SiM Seng liM AH doo lg ong Su kiAt Melvyn

liM CHin Hu Song Su-Min

yeS / no yeS / no yeS / no yeS / no yeS / no yeS / no

(a) whether at any time during the last 10 years, an application or a petition under any bankruptcy law of any jurisdiction was filed against him or against a partnership of which he was a partner at the time when he was a partner or at any time within 2 years from the date he ceased to be a partner?

No No No No No No

(b) whether at any time during the last 10 years, an application or a petition under any law of any jurisdiction was filed against an entity (not being a partnership) of which he was a director or an equivalent person or a key executive, at the time when he was a director or an equivalent person or a key executive of that entity or at any time within 2 years from the date he ceased to be a director or an equivalent person or a key executive of that entity, for the winding up of that entity or where that entity is the trustee of a business trust, that business trust, on the ground of insolvency?

No No No No No No

(c) whether there is any unsatisfied judgment against him? No No No No No No

(d) whether he has ever been convicted of any offence, in Singapore or elsewhere, involving fraud or dishonesty which is punishable with imprisonment, or has been the subject of any criminal proceedings (including any pending criminal proceedings of which he is aware) for such purpose?

No No No No No No

(e) whether he has ever been convicted of any offence, in Singapore or elsewhere, involving a breach of any law or regulatory requirement that relates to the securities or futures industry in Singapore or elsewhere, or been the subject of any criminal proceedings (including any pending criminal proceedings of which he is aware) for such breach?

No No No No No No

(f) whether at any time during the last 10 years, judgment has been entered against him in any civil proceedings in Singapore or elsewhere involving a breach of any law or regulatory requirement that relates to the securities or futures industry in Singapore or elsewhere, or a finding of fraud, misrepresentation or dishonesty on his part, or he has been the subject of any civil proceedings (including any pending civil proceedings which he is aware of) involving an allegation of fraud, misrepresentation or dishonesty on his part?

No No No No No No

(g) whether he has ever been convicted in Singapore or elsewhere of any offence in connection with the formation or management of any entity or business trust?

No No No No No No

(h) whether he has ever been disqualified from acting as a director or an equivalent person of any entity (including the trustee of a business trust), or from taking part directly or indirectly in the management of any entity or business trust?

No No No No No No

(i) whether he has ever been the subject of any order, judgment or ruling of any court, tribunal or governmental body, permanently or temporarily enjoining him from engaging in any type of business practice or activity?

No No No No No No

(j) whether he has ever, to his knowledge, been concerned with the management or conduct, in Singapore or elsewhere, of the affairs of:(i) any corporation which has been investigated for a breach of any law or regulatory

requirement governing corporations in Singapore or elsewhere; or(ii) any entity (not being a corporation) which has been investigated for a breach of any law or

regulatory requirement governing such entities in Singapore or elsewhere; or(iii) any business trust which has been investigated for a breach of any law or regulatory

requirement governing business trusts in Singapore or elsewhere; or(iv) any entity or business trust which has been investigated for a breach of any law or regulatory

requirement that relates to the securities or futures industry in Singapore or elsewhere,in connection with any matter occurring or arising during that period when he was so concerned with the entity or business trust?

No

No

No

No

No

No

No

No

yes1

yes1

yes1

yes1

No

No

No

No

No

No

No

No

No

No

No

No

(k) whether he has been the subject of any current or past investigation or disciplinary proceedings, or has been reprimanded or issued any warning, by the Monetary Authority of Singapore or any other regulatory authority, exchange, professional body or government agency, whether in Singapore or elsewhere?

No No No No No No


26 St engineeRing


liM SiM Seng liM AH doo lg ong Su kiAt Melvyn

liM CHin Hu Song Su-Min

yeS / no yeS / no yeS / no yeS / no yeS / no yeS / no

(a) whether at any time during the last 10 years, an application or a petition under any bankruptcy law of any jurisdiction was filed against him or against a partnership of which he was a partner at the time when he was a partner or at any time within 2 years from the date he ceased to be a partner?

No No No No No No

(b) whether at any time during the last 10 years, an application or a petition under any law of any jurisdiction was filed against an entity (not being a partnership) of which he was a director or an equivalent person or a key executive, at the time when he was a director or an equivalent person or a key executive of that entity or at any time within 2 years from the date he ceased to be a director or an equivalent person or a key executive of that entity, for the winding up of that entity or where that entity is the trustee of a business trust, that business trust, on the ground of insolvency?

No No No No No No

(c) whether there is any unsatisfied judgment against him? No No No No No No

(d) whether he has ever been convicted of any offence, in Singapore or elsewhere, involving fraud or dishonesty which is punishable with imprisonment, or has been the subject of any criminal proceedings (including any pending criminal proceedings of which he is aware) for such purpose?

No No No No No No

(e) whether he has ever been convicted of any offence, in Singapore or elsewhere, involving a breach of any law or regulatory requirement that relates to the securities or futures industry in Singapore or elsewhere, or been the subject of any criminal proceedings (including any pending criminal proceedings of which he is aware) for such breach?

No No No No No No

(f) whether at any time during the last 10 years, judgment has been entered against him in any civil proceedings in Singapore or elsewhere involving a breach of any law or regulatory requirement that relates to the securities or futures industry in Singapore or elsewhere, or a finding of fraud, misrepresentation or dishonesty on his part, or he has been the subject of any civil proceedings (including any pending civil proceedings which he is aware of) involving an allegation of fraud, misrepresentation or dishonesty on his part?

No No No No No No

(g) whether he has ever been convicted in Singapore or elsewhere of any offence in connection with the formation or management of any entity or business trust?

No No No No No No

(h) whether he has ever been disqualified from acting as a director or an equivalent person of any entity (including the trustee of a business trust), or from taking part directly or indirectly in the management of any entity or business trust?

No No No No No No

(i) whether he has ever been the subject of any order, judgment or ruling of any court, tribunal or governmental body, permanently or temporarily enjoining him from engaging in any type of business practice or activity?

No No No No No No

(j) whether he has ever, to his knowledge, been concerned with the management or conduct, in Singapore or elsewhere, of the affairs of:(i) any corporation which has been investigated for a breach of any law or regulatory

requirement governing corporations in Singapore or elsewhere; or(ii) any entity (not being a corporation) which has been investigated for a breach of any law or

regulatory requirement governing such entities in Singapore or elsewhere; or(iii) any business trust which has been investigated for a breach of any law or regulatory

requirement governing business trusts in Singapore or elsewhere; or(iv) any entity or business trust which has been investigated for a breach of any law or regulatory

requirement that relates to the securities or futures industry in Singapore or elsewhere,in connection with any matter occurring or arising during that period when he was so concerned with the entity or business trust?

No

No

No

No

No

No

No

No

yes1

yes1

yes1

yes1

No

No

No

No

No

No

No

No

No

No

No

No

(k) whether he has been the subject of any current or past investigation or disciplinary proceedings, or has been reprimanded or issued any warning, by the Monetary Authority of Singapore or any other regulatory authority, exchange, professional body or government agency, whether in Singapore or elsewhere?

No No No No No No

1 pt indosat: Mr lim was non-executive independent Commissioner of PT indosat Tbk (“PT indosat”) from December 2002 to August 2008, and Chairman of Audit Committee from June 2004 to June 2008. in November 2007, PT indosat along with 6 other indonesian telecommunications companies were investigated by indonesia’s anti-competition, KKPu, on allegations of price-fixing of charges for short text messages and breach of Antimonopoly law of indonesia. PT indosat and 8 other companies were also investigated by KKPu of concern of breaches of Article 27(a) of the Antimonopoly law of indonesia. There was no finding of breach of law by PT indosat at the time Mr lim left PT indosat.

Asian Agri: Mr lim was president of RGM international Pte ltd (“RGMi”) from october 2003 to June 2007 and non-executive vice chairman of RGMi from June 2007 to November 2008. Mr lim was also acting president of AAA oils and Fats Pte ltd (“AAA”) from June 2007 to November 2007 and non-executive deputy chairman of AAA from November 2007 to November 2008. RGMi provides strategy services and support to a global group of independent companies (the “RGM Group”) operating in the resources development sector. Each business group within the RGM group operates independently with its own holding company and directors responsible for the operation of that business group. Asian Agri is a member of the RGM group and AAA is a member of Asian Agri. Certain indonesian companies of Asian Agri operating in indonesia were investigated by the tax authorities of indonesia in November 2006 for alleged non-payment of certain tax. The tax authorities of indonesia had not confirmed any findings of breach of law at the time when Mr lim left the RGM Group in November 2008. Mr lim was not a member of the board nor was he concerned with the management of the companies under investigation.


SENioR MANAGEMENT


vincent Chong Sy feng, is President & CEo of ST Engineering and a Director of the ST Engineering board. (Vincent’s profile is on page 14)

RAvindeR SingH

Ravinder Singh, 54, was appointed President of the Electronics sector in January 2017 and is concurrently the President, Defence business of ST Engineering since July 2017. Prior to this, Ravinder was President of the land Systems sector from March 2015 to April 2017. He joined the Electronics sector in August 2014 as Deputy President, Corporate and Market Development. in his earlier career, Ravinder served as the Chief of Army, Singapore Armed Forces (SAF) and the Deputy Secretary (Technology), Ministry of Defence, Singapore. He graduated with a bachelor of Arts in Engineering Science (First Class Honours) and a Master of Arts in Engineering Science, both from the university of oxford, uK. Ravinder also attained a Master of Science in Management from Massachusetts institute of Technology, uSA, and attended the wharton Advanced Management Program.

dR lee SHiAng long

dr lee Shiang long, 53, was appointed President of the land Systems sector in April 2017. Previously, he was President, Defence business of land Systems and Deputy Chief Technology officer, ST Engineering. Prior to joining ST Engineering, Dr lee was Executive Director of the institute for infocomm Research (i2R), where he was tasked to coordinate efforts throughout A*STAR for Services and Digital Economy for Singapore RiE 2020 (Research, innovation and Enterprise). He led i2R to re-focus on A*STAR mission for a greater social and economic impact, aligned to Singapore’s Smart Nation initiative launched in early 2014. Prior to i2R, Dr lee served in the SAF for 23 years. His last appointment was Head of Joint Communications and information Systems Department, and Chief information officer. Dr lee holds a Master in business Administration from Cambridge university and PhD in Mechanical Engineering from the Nanyang Technological university, Singapore (NTu), as well as a Master Degree in Science (iT) from NuS.

liM SeRH gHee

lim Serh ghee, 59, was appointed President of the Aerospace sector in December 2014. Prior to this, he was Chief operating officer from 2010 and President, Defence business. Serh Ghee also served as Executive Vice President of Aircraft Maintenance & Modification (AMM), a business segment of Aerospace. He began his career with the Aerospace sector as a mechanical engineer in 1984 and has held many senior management appointments within the sector. Serh Ghee

holds a Second Class upper Honours degree in Mechanical Engineering from the National university of Singapore (NuS). He obtained his Master of Science in Aerospace Engineering from the university of Michigan and attended the Program for Management Development at Harvard business School.

28 St engineeRing

geneRAl (Ret.) joHn g CobuRn

general (Ret.) john g Coburn,77, was appointed ExecutiveChairman of ST Engineering’s

ng Sing CHAn

ng Sing Chan, 58, was appointed President of the Marine sector in May 2010. Prior to this, Sing Chan was Deputy President and President, Defence business of the Marine sector. He joined the Marine sector in 1987 as an engineer. Sing Chan left in 1991 and later became the Deputy General Manager of Pan-united Shipyard Pte ltd. He subsequently took on the positions of President of Changshu xinghua Changjiang Dev Co and Executive Director of Pan-united Marine ltd (now known as DDw-Paxocean Shipyard Pte. ltd.). Sing Chan re-joined the Group in March 2008 as Executive Vice President, Special Projects, ST Engineering and moved to Marine as Deputy President in April 2009. Sing Chan holds a Master of business Administration (Finance & banking) from NTu, and a Masters in Engineering from the university of Hamburg, Germany.

CedRiC foo CHee keng

Cedric foo Chee keng, 58, was appointed Chief Financial officer of ST Engineering in July 2017. Prior to this, Cedric was Advisor (Corporate Development) of the Group since october 2016. He had previously served as Chief Financial officer and in senior management roles in large-

eleAnA tAn Ai CHing

eleana tan Ai Ching, 56, was appointed Chief Corporate officer of ST Engineering in July 2017 when she relinquished her role as the Chief Financial officer, a position she had held since March 2008. She was previously Managing Director, Finance, Temasek Holdings (Private) limited (Temasek). Prior to that, Eleana was Director of Finance at Singapore Technologies Pte ltd (STPl) from August 2003 until December 2004, when STPl was restructured, and its assets transferred to Temasek. Prior to 2003, she had held various key finance positions in the ST Engineering Group over a period of 13 years and last held the position of Group Financial Controller of ST Engineering. Eleana holds a bachelor of Accountancy (Honours) from NuS and attended the Harvard business School’s Advanced Management Program in 2013. She is a member of the institute of Singapore Chartered Accountants.

cap companies, and was also Chairman of JTC Corporation and SPRiNG Singapore. He holds a bachelor of Science in Engineering (Naval Architecture and Marine Engineering) from the university of Michigan, Ann Arbor, uSA and received his Master of Science (ocean Systems Management) from the Massachusetts institute of Technology, Cambridge, uSA. Cedric also attended Executive Programmes at Harvard and Kellogg business Schools.

u.S. subsidiary, VT Systems, in December 2001. Following his relinquishment as CEo of VT Systems, he remained as Director of VT Systems and became non-executive Chairman of VT Systems Advisory board with effect from 1 December 2018. He joined the Group after an illustrious 39-year career with the u.S. Department of Defense, where he commanded at all levels, including as Commanding General of the u.S. Army Materiel Command with an annual budget of $39.2 billion. Gen (Ret.) Coburn is the recipient of many medals, and is a notable author and speaker. He is a graduate of the u.S. Army Command and Staff College, and the industrial College of the Armed Forces. He holds a Juris Doctor degree from the university of Missouri, a PhD from Eastern Michigan university, as well as many other degrees. He is licensed to practice law before the Supreme Courts of Michigan and Kentucky, the united States Army Court of Criminal Appeals, the District of Columbia Court of Appeals, and the Supreme Court of the united States.


AeRoSpACe

ele

CtR

on

iCS

MARine

Sma

rt C

ity

2022tArgets

Core and other businesses CAgR

global GDP growth rate over the next

5 years

2x – 3xSmart City revenue of

to more than double by

2022

$1b

net profits to grow

in tandem with revenues

two-thirdsof revenue

growth to be from

global markets

in 2018, we shared our five-year plan which comprises a set of goals developed collectively by our team of business leaders across the Group. we will strengthen our core businesses through continuous investments in key assets and capabilities and pursue opportunities in international defence business and smart city.

We AsPire to be A gLobAL technoLogy, Defence & engineering PoWerhouse

international DeFenCe

30 St engineeRing

AeRoSpACe

ele

CtR

on

iCS

lAn

d S

ySte

MS

building on our position of strength for the next stage of growth

are in engineering & technical roles22,000 employees16,000 of

implemented more than

smart city projects 500

cities worldwide70across

Strong fundamentals to support value creation

balance sheetAAA

well-positioned to enhance portfolio value

Solid track record in smart city solutions

Armoured vehicles

Total naval solutions

weapons& munitions

proven export successes in defence capabilities

A future-ready and high-performing workforce


we develop build-to-design technologies, drive digitalisation purposefully with our Mobility, Security and Environment solutions for the Smart Cities of tomorrow.

we also introduce digital "soldiers" to meet tomorrow’s battlefield by creating operational and warfare advantages for global armed forces with our portfolio of competitive platforms, smart munitions and soldier systems.

buiLDing smArt AnD secure cities gLobALLy

i n t e g r at e d d e f e n c e

SMARt enviRonMent+ Smart Street lights+ Smart utilities+ waste and water Management

+ digitAl ConneCtivity + RobotiCS

MAnned-unMAnned teAMing

Next-Generation Armoured Fighting Vehicle

integRAted bAttlefield MAnAgeMentSySteM

+ AnAlytiCS & ARtifiCiAl intelligenCe

32 St engineeRing

i n t e g r at e d d e f e n c e

SMARt SeCuRity+ Aviation & Maritime Security+ Key installation Security+ Cybersecurity Solutions+ Drone Network Solutions

SMARt Mobility+ Smart Metro Control Centre+ Command, Control & Communications System+ Platform Screen Door+ Automatic Fare Collection System

+ Autonomous Vehicles+ Passenger information System + integrated land Transport operation Centre+ integrated Traffic Management and Security Systems

+ digitAl ConneCtivity + RobotiCS

Precision Fire

weaponised unmanned Ground Vehicle

weaponised unmanned Aerial Vehicle

MotHeRSHip ConCept

Mounted & diSMounted opeRAtionS

CollAboRAtiveSenSing And CoMbAt

engAgeMent

+ AnAlytiCS & ARtifiCiAl intelligenCe


iNNoVATioN: CREATiNG A SMART FuTuRE

Technology and innovation is in our DNA, which underpins what we do as a global technology, defence and engineering group.

From creating sustainable innovations that push the boundaries of R&D, to disruptive technologies that redefine ways of thinking and doing, we are constantly reinventing and innovating.

our innovation approach, integrated with deep, multidisciplinary engineering expertise and capabilities, enables us to continuously create game-changing solutions in domains such as smart cities, robotics, data analytics, cybersecurity and autonomous solutions. Through strategic collaborations, we leverage collective genius from the global technology ecosystem, deepening and broadening our capabilities and strengths to enable new possibilities that shape a better future.

People remain our strength in this innovation journey. our global workforce, two-thirds of which comprises engineering and technical talents, is what differentiates us and is our key to a smarter future.

Corporate and research labs

our collaborations with academic and research institutions help to accelerate the research, development and commercialisation of new technologies and solutions, conferring our customers a competitive edge.

Strategic technology Centres (StCs)

our STCs deepen our capabilities in data analytics and cybersecurity, delivering more powerful products and solutions that add value to our business.

Corporate Venture Capital

we invest in promising technology start-ups with strong capabilities in data analytics, cybersecurity and transportation technology.

leveRAging StRengtHS And foRMing pARtneRSHipS witHin tHe teCHnology eCoSySteM

Digital office

The Digital office synergises and accelerates the Group’s digitalisation efforts, enabling us to deliver enhanced customer value and capture new opportunities in the digital economy.

34 St engineeRing

StRoboSecurityRobot

barrier-free Automatic fare Collection System

Autonomous Mini-bus

open innovation lab

Apart from being an innovation exchange for our engineers, our open innovation lab supports entrepreneurs and start-ups with resources and expertise to fast track their innovations to market.

innovAtion HigHligHtS 2018

1. The autonomous mobility-on-demand trial in Sentosa leverages technology to improve urban mobility in Singapore.

2. The STRobo Security Robot uses artificial intelligence and machine perception to pick up anomalies in the environment and effectively detect intruders.

3. our barrier-free hands-free Automatic Fare Collection System for rail systems, delivering optimised operational efficiency and seamless commuting.

4. DroNet harnesses an integrated network of drones to enhance the way we live and work in an urban setting.

5. Folo Fleet is a semi-autonomous smart mobility device convoy system which allows a single operator to manage multiple transporters at the same time, maximising productivity and enabling effortless operations.

6. Airbitat oasis Smart bus Stop is capable of using water to cool air to as low as 24°C and removing harmful airborne particles such as PM2.5.

7. The wiSx Smart Street lighting equipped with on-demand, intelligent light control and predictive analytic capabilities helps municipals realise up to 40% energy and maintenance cost savings.

8. The STRobo family of autonomous material handling equipment for warehouse, airport, seaport and manufacturing industries.

9. NERVA Ship Management and Sensemaking System (SMS2) is a class-certified integrated alarm, monitoring and control system for ship operators. SMS2 allows intelligent Hull, Mechanical and Electrical (HM&E) management and control of the ship systems and uses Ai for predictive diagnostics and condition-based monitoring.

2 36

8 9

71 4 5


dronet

folo-fleet

Autonomous Mini-bus

SmartStreetlighting

Airbitat oasis Smart bus Stop

neRvA Ship Management System

StRobo Suite

Operating review& OutlOOk

Despite intensifying competition, we maintained our strong industry leadership position. we continued to strengthen our core business in MrO services, invest in new growth areas and build up our capabilities in areas such as data analytics to enhance our service offerings.

AEROSPACE

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2018 REvIEw

Our aerospace sector performed well in 2018, with the tempo remaining upbeat throughout the year. Our hangars and repair shops saw a steady stream of maintenance work for aircraft airframe, engines and components.

although competition continued to intensify with new and potential entrants eyeing a share of the Maintenance, repair and Overhaul (MrO) pie, we set ourselves apart with our wide

global network by delivering to the satisfaction of our customers, time and again. During the year, we expanded our capacity in the u.S. with a new airframe facility. Our excellence was once again recognised when we were named Overall MrO of the Year for the second year running at the 2018 aviation 100 MrO global awards.

while MrO remains core to our aerospace business, we continued to invest in adjacencies and new growth areas that could add value to our MrO work and give us a competitive edge through the ownership of intellectual property.

AIRcRAfT MAINTENANcE & ModIfIcATIoN (AMM)

against the backdrop of a buoyant aviation industry, our aMM business continued to secure a number of contracts for both light and heavy maintenance during the year, which included a five-year exclusive MD-11 heavy maintenance support contract from lufthansa Cargo and a contract to support a major north american airline’s a321s for the first time. the same north american airline also awarded a contract for an in-seat power supply, overhead bin and galley modification programme for their entire fleet of 48 a320s.

with international and domestic air travel on the rise, we also continued to expand our capacity in anticipation of strong demand for airframe maintenance in our key markets. in June, we officially opened a new airframe MrO facility in pensacola, Florida, u.S.. we gathered more momentum in capacity building when we signed a Memorandum of understanding (MOu) with the City of pensacola in October to pursue the development of a 655,000 sq ft airframe MrO complex next to our newly opened hangar. upon completion, we will have an annual capacity of 2.1 million labour hours in pensacola.

Our vip completions business, aeria luxury interiors (aeria), continued to grow in strength. aeria secured a Boeing Business Jet project, its third since the business started in 2012. aeria also reached a new milestone when it secured a

industry recognition

Awards included Overall MRO of the Year, won for the

second year running.

Secured new contracts worth a total of $2.06bA number of these contracts were multi-year agreements signed with repeat customers.

37annual repOrt 2018


the new airframe MrO facility in pensacola, Florida, u.S..

maintenance support contract for its first airbus Corporate Jet (aCJ) customer. the project allows aeria to showcase its capability and technical knowledge in airbus platforms to potential aCJ customers.

apart from vip completions, other aircraft interior modification contracts secured during the year included one from air Canada to perform interior reconfiguration on part of the airline’s a330-300 fleet.

coMpoNENT/ENGINE REpAIR & ovERhAul (cERo)

in 2018, our component repair and overhaul facilities delivered 42,908 components and 163 landing gears, while our engine repair and overhaul businesses completed 167 engines and 9,883 ecopower® engine washes.

the robust economy and a burgeoning middle class in asia have created an ideal environment for the growth of the aviation industry. riding on this, we signed an MOu with vietnam airlines in april to set up a joint venture (Jv) to provide component MrO solutions. the Jv, to be headquartered at noi Bai international airport in Hanoi, will cater to vietnam airlines’

requirements and the region’s increasing demand for aircraft MrO services.

in addition to the MOu, we also entered into a 14-year component Maintenance-By-the-Hour (MBH™) contract with vietnam airlines to support the airline’s entire fleet of a321ceos and a321neos, including other a321s that will enter its fleet, starting from mid-2018.

we further grew our support for operators in asia when we secured our first multi-year component MBH™ contract from Japan airlines and an MBH™ contract with expanded

scope from Japan’s Solaseed air to service their fleets of Boeing 737-800s.

with a steady growth in narrowbody engine shop visits, our engine work maintained strong momentum in 2018. Our facilities in Singapore and Xiamen, China enjoyed high levels of utilisation through the year due to an upward trend for CFM56-5B and -7B shop visits.

in anticipation of the continuous high demand, we have ramped up our manpower to increase our capacity by 50%.

while time and Material service packages remain popular, operators are increasingly exploring power-by-the-hour programmes and entering into long-term contracts to lock in capacity for their projected maintenance needs of CFM56-7B and -5B engines.

ENGINEERING & MATERIAlS SERvIcES (EMS)

even as we strengthen our core business in MrO services,

expanded our MrO network with a new facility in the u.S. The new facility increases our capacity to serve the North American market and our global clientele.

38 ST ENGINEERINGST ENGINEERING

Celebrating the order for 10 a321 converted freighters with launch customer, vallair.

MOu signing with vietnam airlines for the setting up of a component MrO joint venture at the vietnam-Singapore Business Forum 2018.

we are also investing in new growth areas that synergise with our engineering and MrO capabilities to sharpen our competitive edge. at the same time, we continue to build on our engineering expertise and aircraft assets to provide innovative solutions such as freighter conversions and unmanned aerial systems.

Passenger-to-Freighter Conversions (P2F) with air cargo forecasted to grow at 4% Cagr over the next 20 years, freighter conversion is one growth area we will continue to focus on. By 2022, we expect to book an annual revenue of more than $400m from this business.

During the year, we secured a launch contract for our new a321p2F programme when vallair ordered 10 p2F conversions from us. the first aircraft was inducted in november, and is scheduled for redelivery by the end of 2019.

in august, we redelivered our first converted a330-200 freighter to egyptair Cargo. this redelivery marks the successful inauguration of our entire a330p2F family which comprises the -200p2F and the larger -300p2F variant

(we redelivered our first a330-300p2F at the end of 2017). Cabin Interiors and ManufacturingOur ergonomically-designed aircraft seats, SpaCelite, received international recognition when it won the 2018 Japan good Design award. while this business is still nascent, we have set up management and quality control systems, and built capacity to deliver 5,000 seats annually.

in europe, we expanded our capacity in composite panel manufacturing with the opening of a second plant in kodersdorf, Saxony, germany. with the global commercial and cargo aircraft fleet expected to grow strongly over the next 10 years, the increased capacity will help meet the rising demand for aircraft floor panels and cargo compartment linings.

Aircraft Leasingwe expanded our fleet to a total of six aircraft in 2018, all of

which are on lease to operators. we will continue to grow our portfolio of mid-life aircraft assets that best align with our technical capabilities and service offerings so as to complement our core MrO and p2F aircraft conversion businesses.

Unmanned Solutionswe rolled out the first Dronet system application, which utilises an integrated network of autonomous drones to complete a range of tasks including infrastructure inspection, assets management and public security in an urban environment, for customers to do on-site trials at the end of 2018.

we are also lending our industry experience to the Civil aviation authority of Singapore (CaaS) to help shape regulatory frameworks for Beyond visual line of Sight (BvlOS) unmanned aircraft System (uaS) operations in Singapore’s urban environment. in addition, we will collaborate with CaaS to develop new concepts,

Secured a launch contract for a321p2F Vallair placed 10 firm orders, while an LOI for a potential order of 10 units A320 P2F was signed with Guangdong Aerocity.



procedures and technologies that enable BvlOS uaS operations in Singapore.

New Growth Area in Nacelle ManufacturingDuring the year, we proposed to acquire Mra Systems (MraS), an engine nacelle original equipment manufacturer (OeM) based in Baltimore, Maryland, u.S.. MraS’ proprietary designs and expertise in manufacturing nacelle systems will allow us to move into the OeM business of high-value nacelle components and replacement parts, thereby scaling up our aerospace capabilities.

MraS’ design, engineering and manufacturing know-how in advanced composite structures can also create synergies with the group's composite manufacturing capabilities. the transaction is expected to close by end of the first quarter in 2019.

INduSTRy ouTlookthe industry is expected to continue its growth trajectory in

2019, led by growing commercial aircraft production and strong defence spending.

according to Deloitte, the commercial aircraft order backlog is at its peak of more than 14,000, with about 38,000 aircraft expected to be produced globally over the next 20 years.

with the global aerospace industry projected to continue its robust growth, we are confident of the long-term prospects of the industry and we will continue to invest in core and adjacent businesses to capture growth opportunities. at the same time, we are mindful of the increasingly competitive landscape and we continue to sharpen our competitive edge by enhancing our capabilities and our suite of solutions.

Strengthening our Core with Technologyto repeatedly deliver high standards and value-added services to our customers, we continuously strengthen our core capabilities.

One of the ways we do this is by investing in technologies to create better value propositions. these include digitisation and data analytics which assist in optimal maintenance planning for customers; automation to ensure quick turnaround times and consistent quality repair/overhaul for customers; and additive manufacturing to create virtual warehouses for customers.

During the year, we fully digitised our engine MrO facility in Singapore. looking ahead, we will continue to deploy the paperless system and aim to achieve digitalisation across our global network of facilities. we continue to introduce robotics into our operations to increase productivity and will soon introduce an unmanned solution for aircraft inspection using drones.

On the additive manufacturing front, we have been conducting trials for interested airline customers to create a virtual warehouse for cabin parts. to date, we have been granted

acquiring a nacelle manufacturing company will enable us to scale up our capabilities and move into the OeM business.

Scaling up our aerospace capabilities

The proposed MRAS acquisition allows us to scale up our aerospace

capabilities by moving into the OEM business of making high-value nacelle systems.

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Once the acquisition of MRAS is completed, we will focus on integrating the new subsidiary and enhancing our solution offerings with our new nacelle capability. At the same time, we will continue to look out for opportunities in the OEM space that can further add value to our aerospace business.

Forming Strategic PartnershipsWhile OEMs and airlines have been getting more involved in the MRO aftermarket, they are still, to a large extent our partners and customers rather than our competitors. We will continue to pursue strategic partnerships that lead to win-win situations. One example is when we divested a 5% stake in ST Aerospace (Guangzhou) Aviation Services Company, a JV with the Guangdong Airport Authority, to Japan Airlines in early 2018 to further strengthen our partnership.

Given Japan Airlines’ strong reputation in quality and standards for its services and the demands placed on MRO service providers, the strengthened partnership will facilitate cross-learning and enable the JV to enhance its standing in safety and quality, and be better positioned for growth.

As for our planned component MRO JV with Vietnam Airlines, we expect to set it up in the first half of 2019. In the meantime, we have set up a component inventory base in Vietnam to service the MBH™ contract for Vietnam Airlines.

certification by the European Aviation Safety Agency for certain parts and we are working towards similar certification with other authorities to expand our inventory list.

Investing in Growth AreasAs we strengthen our core MRO business, we continue to invest in adjacent businesses and new growth areas that can add value to our MRO work and sharpen our competitive edge. Aircraft leasing and freighter conversions are two growth areas that we continue to focus on. As we ramp up our conversion activities to fulfil contracts secured in 2018, we will increase capacity in accordance with the scheduling needs of our clients.

Looking ahead, we are exploring value-added solutions to add to our freighter conversion offerings. With increasing global demand for air freight and a growing shortage of air crew, we believe unmanned freighters can be a viable solution and will provide tangible benefits such as lower operational costs. We are currently studying this concept diligently with our partner.

Moving Upstream into OEM SpaceBeing an MRO service provider with strong engineering capabilities accords us the advantage of moving into growth areas that require design and engineering expertise, for instance freighter conversions.

Apart from organic expansions, we have been looking to acquire new businesses in the OEM space that can capture synergies with our MRO business and engineering capabilities.

As the global aviation industry continues on its growth trajectory, moving upstream into the business of nacelle design and manufacturing will allow us to benefit directly as an OEM.

Key Focus in 2019

1.Strengthen core capabilities and continue to enhance services through Industry 4.0 SMART MRO initiatives.

2. Focus on integrating MRAS into the Group upon the completion of acquisition.

3.Continue to invest in growth areas such as freighter conversions and aircraft leasing.

41AnnuAL REpORT 2018


Driven by our passion and pursuit of engineering excellence to create value for our customers, we introduced innovative, cutting-edge products and capabilities such as our barrier-free, hands-free automatic Fare Collection system.

ElECtROniCS

42 ST ENGINEERING

innovation for our customersRail Enterprise Asset Management System and iDirect Velocity were launched to help smoothen our customers’ business transformations.

2018 REvIEw

against a backdrop of constant technological transformation that is impacting businesses and cities worldwide, we continued to capitalise on our core competencies in technology and engineering to enable our customers to maintain a competitive edge in a complex market.

with a focus on spurring the next wave of international business growth, we actively pursued the growing market needs of Smart Cities for Connectivity, Mobility and Security.

Smart Connectivityweathering the past year’s global market, we extended our satellite communications global reach into africa and latin america, enabling cost efficiencies for satellite operators, as well as reliable and affordable connectivity for consumers.

Delivering the latest developments in high throughput satellite capacity to the market, we were chosen as the ground infrastructure provider for inmarsat’s fifth global Xpress high-speed, broadband communications satellite.

On the new technology front, we were part of a global Sat5g Consortium-led live test of the seamless integration of satellite technology with 5g networks, a significant milestone expected to transform the global communications industry, making truly global connectivity closer to reality.

as part of the long-term growth strategy of our satellite communications business, we established a new joint venture named Jet-talk in the uk. through this joint venture, we are developing a state-of-the-art satellite antenna system

that delivers enhanced in flight connectivity for commercial aviation, an emerging high-growth market.

Our proven solutions in smart sensors and internet of things (iot) networks for urban city management through the application of advanced analytics continued to gain traction. Contracts secured included proof-of-concept trials to deploy smart lamp posts in kowloon east, Hong kong’s Smart City pilot area and in Singapore, as well as enabling near real-time management of urban water resources and smart street lighting in cities in Canada, israel, new Zealand, the uk and the u.S..

we launched Singapore’s first pay-per-use iot-as-a-Service platform in collaboration with Sp telecom and Sp group, providing opportunities for enterprises and iot partners to move into the iot space faster and more cost efficiently. enterprise users and iot partners are now able to leverage a secure network, thousands of Sp telecom hubs across the country, and a multi-edge computing iot platform to bring services faster and closer to their customers.

reinforcing our commitment to deliver value to customers through incorporating data analytics capabilities into our product and solutions, we invested in azendian, a Singapore-based data analytics company. the investment enhanced our smart data analytics capabilities and enabled the development of suites of ai tools with machine learning capabilities.



Smart MobilityCapitalising on our experience of delivering over 100 rail electronics solutions to 45 cities worldwide, we continued to expand our global reach and increase our market share with contracts secured for Mass rapid transit (Mrt) lines in Bangkok, guangzhou, Jakarta, new taipei City, taoyuan and wuhan.

in Singapore, we are the trusted partner of choice for local transport customers, supplying our comprehensive smart rail electronics solutions for the thomson-east Coast line, the north-South Corridor, the north-South and east-west Mrt lines, as well as a rail enterprise asset Management System for the Downtown line which couldpotentially extend to the entire Mrt network.

Our barrier-free hands-free automatic Fare Collection (aFC) system was launched as the newest addition to our comprehensive rail electronics solutions. adopting long-range radio-frequency identification, facial recognition and stereoscopic people-counting camera technologies, the new aFC system takes less than a second for speedy commuter verification at the fare gates.

a version of our hands-free aFC was adopted as part of a public trial at Bedok,

kembangan, redhill and tiong Bahru Mrt stations in Singapore from June to november, enabling passengers with disabilities, the elderly and parents with children in strollers to easily enter and exit Mrt stations without tapping their fare cards.

to better support the growing demand for metro rail, intelligent transportation and intelligent building management projects in Chongqing and other parts of China, we established a subsidiary in the liangjiang new area, Chongqing, that will enhance our expansion efforts in the region.

Smart Securitywe won new public safety and security contracts from global customers, furthering our credentials in protecting more than 100 critical national infrastructure and high-value assets from intrusions and attacks. these included a radar surveillance system for Brazil’s itapu Hydroelectric Dam, the world’s second largest hydropower plant. the u.S.-based national Safe Skies alliance has completed testing and evaluating our award-winning agilFence perimeter intrusion Detection System.

in 2018, we supplied our customers with an integrated Counter Drone System that detects, classifies and tracks

commercial drones; a Crisis and incident response trainer to enable command and planning that hones decision-making skills in different scenarios and in the strategic deployment of forces; as well as an automated Biometric and Behavioural Surveillance System equipped with video analytics capabilities.

to ensure navigation safety in Singapore’s port waters and the Singapore Strait, we formed a consortium with kongsberg norcontrol to develop a next generation vessel traffic Management System. the system will have new decision-support tools such as analysis of vessels routes, traffic hotspots prediction and detection of potential collision situations that will provide accurate and comprehensive maritime situational awareness.

to help our customers protect and secure their systems against sophisticated cyberattacks, we have invested in breakthrough cyber technologies that complement and strengthen our existing cybersecurity capabilities. Our investment in

Our smart lamp post leverages sophisticated technologies such as artificial intelligence-based video analytics systems to “smarten up” global cities.

invested in data analytics and cybersecurityEnabling our customers to enjoy expanded access to breakthrough technologies that support their digital transformation.

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radiflow, a leading provider of industrial cybersecurity solutions for critical infrastructure based in israel, has provided us with access to radiflow’s detection and prevention tools which were used to develop the region’s first end-to-end cybersecurity solution aimed at the rail transport industry.

we also strengthened our existing suite of cybersecurity products and solutions to help our customers in the Critical information infrastructure (Cii) sectors shore up their defences. these included our new advanced Cybersecurity Command and Control Centre, designed to help Cii sectors defend against multi-tiered cyberattacks through its cutting-edge capabilities in artificial intelligence and industrial Control Systems anomaly detection.

we unveiled DigiSaFe DiskCrypt M10, the world’s thinnest two-factor authentication (2Fa) encrypted data storage equipped with sophisticated cyberdefence features such as real-time hardware encryption and 2Fa with smart card protection.the DiskCrypt M10 was awarded the CeS 2019 innovation awards Honoree in recognition of its outstanding design and engineering.

recognising that technology alone is insufficient to combat today’s cyberattackers, we have partnered with the Singapore university of technology and Design (SutD) to co-develop new cybersecurity courses. these courses help to develop hands-on skilled expertise in securing operational technology networks of critical

infrastructures that deliver essential services such as energy, aviation, maritime and land transport.

Since 2011, our in-house specialised cybersecurity professionals have been helping our customers fend off cyberthreats at the frontline, successfully keeping their networks safe and secure. For our achievements in cybersecurity, we secured an (iSC)2 asia-pacific information Security leadership achievements (iSla®) Managerial professional award, the only Singaporean honoree out of 17 other international cybersecurity experts to receive this prestigious accolade by the industry.

armed with real-time knowledge of the cyberthreat landscape, we have sought to deliver innovative products and technology, threat intelligence and leading expertise to help our customers prepare for, respond to and prevent cyberbreaches. Significant orders we had delivered in the past year included an advanced Cybersecurity Operations Centre to enhance the security capabilities of the maritime and port operations sector as well as a Security Operations Centre for Sri lanka’s Bank of Ceylon.

in the area of naval defence, we have developed two 360-degree littoral Mission vessel (lMv) simulators that enable ship crew training in bridge watch-keeping, engineering and naval warfare for the republic of Singapore navy's new lMv Simulation Centre. it is the first ship simulator that adopts virtual reality technology, offering increased depth perception for challenging

scenarios such as dealing with small vessels. the simulator has resulted in enhanced training effectiveness and shortened training by more than 50%.

For land defence, our vehicle integrated Communications System 2–united States secured certification of compliance to the u.S. army’s vehicular integration for C4iSr/ew interoperability (viCtOrY) standard. the viCtOrY standard enables C4iSr components installed in military vehicles to interoperate across a common message format, enhancing mission effectiveness and soldier survivability.

INduSTRy REvIEw ANd ouTlook

2019 will continue to be a year of rapid technological changes. Disruptive technologies such as artificial intelligence, cloud-based computing and new developments in iot are rapidly maturing from game-changing ideas to foundational tools for business. in the coming year, we can expect to see these technologies drive the way businesses are conducted at forward-thinking organisations.

powering ahead with global growth

momentum Established a subsidiary

in Chongqing, China, and captured new global markets

such as Abu Dhabi, Brazil, Colombia, Dubai, Hong Kong,

Jakarta and Kuwait for our leading-edge products.



Our award-winning perimeter intrusion detection system, agilFence piDS, protects high-value assets against intrusions and attacks.

Boosted by our core technological expertise and our culture of innovation, we are poised to capture new opportunities and markets by leveraging these new technology breakthroughs. given this, we will be on solid ground to take on the challenges in the next decade.

Smart Connectivity: Satellitethe change in bandwidth economics driving industry consolidations, the fast-growing market of aviation connectivity, the increase in smaller satellites, the use of low-earth orbit satellite constellations as well as new use cases for 5g and iot are some key industry developments that are presenting opportunities for our satellite business. Many of these industry trends are enabling the delivery of a lot more data at relatively lower cost. this has resulted in a significant increase in the utilisation of satellite products and services as new markets and opportunities open up.

this bodes well for us as a leader in the satellite-based internet protocol communications

market, as we expect to continue delivering innovative, cost-effective satellite solutions and products that create value for our customers in more than 100 countries worldwide.

Smart Connectivity: IoTas iot technology and service providers and adopters continue to grapple with nascent technologies, the lack of standards and complex integration requirements, there is evidence that iot providers are leveraging new technologies and updating their go-to-market business models to equip adopters with the tools to implement and derive the benefits of iot solutions.

we have leveraged our expertise in info-communications, software technologies and cybersecurity as well as our strong network of partners to deliver an iot platform that simplifies the complexities, manages the connectivity and streamlines the development and deployment processes. we will continue to deliver value

to our customers, helping them embrace predictive analytics and automate decision-making.

Smart Security: Public Safety & Securityglobalisation and technology have transformed the landscape of crime, effectively lowering the barriers for criminal syndicates, terrorist groups and radicalised individuals to identify targets of value and carry out attacks. governments, security agencies and critical facility owners face an urgent need to modernise their public safety and security infrastructure to effectively protect citizens, organisations and critical infrastructure from harm.

in the face of these looming threats, we introduced innovative solutions such as anti-piracy capabilities, counter-drones and intrusion detection products, as well as security solutions for the protection of key installations, especially in the aviation as well as the maritime sectors. implemented in over 15 cities around the world, our comprehensive public Safety & Security solutions provide a holistic approach in deterrence, detection and response, and we will continue to deliver enhanced solutions that counter security threats effectively.

Smart Security: Cybersecurityas cyberattacks become more frequent and severe, and expand beyond it networks, we can expect governments and enterprises to ramp up their focus on protecting their it infrastructure and data from such attacks. there is also an increasing focus on Operational technology (Ot) cybersecurity to support industrial control systems of critical infrastructures at the core of essential services such as transport networks

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equipped with machine learning capabilities and iot cloud-based technology, our next generation vessel Operations Control Centre enables real-time monitoring of ships and sea conditions.

and power plants. global cities will continue to focus on the build up of indigenous cybersecurity capabilities and a sovereign talent pool in order to counter the evolving nature and sophistication of cyberthreats.

these present major opportunities for us, as we develop even more robust cybersecurity solutions, incorporating the latest frontier technologies, and train more than 2,000 cyber professionals over the next three years to plug the cybersecurity manpower gap faced by local critical sectors.

Smart Mobility: Railthe rail electronics industry is faced with the need to leverage innovative technologies through digitalisation to drive efficiency, support complex rail operations and enhance commuting experience. at the same time, rail operators are increasingly challenged by ageing infrastructure and systems that affect the overall availability and reliability of rail services. this has led to a growing demand for data-centric asset management platforms that enhance rail maintenance and

renewal planning capabilities through advanced data analytics and business intelligence.

Our experience in enterprise asset management systems and continuous development of innovative solutions and platforms through digitalisation, bolstered by our deep domain knowledge in integrating complex rail systems, put us in a strong position to help rail regulators and operators surmount their current challenges.

Smart Mobility: Roadurbanisation continues to create demand for new transportation management solutions to alleviate congestion in cities. intelligent solutions in areas such as urban traffic, public transport and car park management are designed to help improve the flow of people, goods and services in cities around the world. we have built up extensive experience and networks in this space and are well positioned to play a significant role in the implementation of innovative transportation management systems in the Smart Cities of the future.

kEy focuS IN 2019

1.penetrate into new and growing Smart City markets

2. Strengthen core competencies and end-to-end capabilities

3.Continue to embed data analytics, artificial intelligence and cybersecurity into our products and solutions.



the land Systems sector is focused on strengthening its core capabilities, leveraging technology to add value and deliver innovative solutions to its customers.

lAnDSYStEMS

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2018 REvIEw

During the year, the land Systems sector achieved many successes in its defence, commercial and robotics businesses.

Defence BusinessOur participation in two large u.S. defence programmes – the u.S. Marine Corps (uSMC) amphibious Combat vehicle phase 1, increment 1 (aCv1.1) and the u.S. army's Mobile protected Firepower - was a significant achievement. Having our terrex 2 and next generation armoured Fighting vehicle (ngaFv) successfully complete rigorous testing by the uSMC and the u.S. army respectively is a validation of the maturity of our defence engineering capabilities and the experience gained was invaluable.

Our participation in these closely-watched programmes has thrown a global spotlight on our terrex and ngaFv, and has given us confidence as we pursue other global opportunities.

the ngaFv platform which was submitted for the MpF programme performed well and successfully completed the rigorous tests by the u.S. army.

the sector also worked with global partners to strengthen its value proposition for international defence. we signed a cooperation agreement with Hirtenberger Defence Systems (HDS) in the uk to offer a comprehensive 120mm mortar solution combining our 120mm Super rapid advanced Mortar System (SraMS) weapon system with HDS’ mortar fire control system and 120mm mortar ammunition. the result is a superior weapon system with outstanding performance and reliability.

we announced a marketing partnership with paramount to bring the Belrex protected vehicle to the global market. the vehicle, designed to be

highly flexible, can be configured to carry combat loads for a variety of combat support and logistical functions. it is also designed for peacekeeping roles in conflict areas and other paramilitary roles. leveraging our strong and proven expertise in the design and development of armoured mobility platforms, we will manufacture 10 variants of the Belrex protected vehicle in Singapore.

in addition, we showcased our comprehensive suite of systems and solutions at major defence and technology exhibitions as part of our global marketing outreach, including Singapore airshow 2018, eurosatory in paris, the 2018 annual

ngaFvDuring the year, work began to establish a production line for the NGAFV.


the Belrex protected vehicle family of 10 variants that were designed and developed in Singapore.


Meeting and exposition of the association of the u.S. army (auSa) in washington, DC, and Defence vehicle Dynamics 2018 in the uk.

Strengthening local defence capabilities continues to be key to the group, with a greater focus on using technology to develop innovative solutions while achieving greater efficiencies for our customers, such as the use of robotics and incorporating augmented/virtual reality into our training solutions. During the year, we began work to establish a production line for the ngaFv. Delivery of the vehicles will begin in 2019.

as a leading provider of 40mm solutions, we continue to expand our product range with innovations like the 40mm Counter unmanned aerial System and the 40mm Door Breaching rounds.

Robotics and Autonomous Vehiclesunderlining our growing focus on robotics and autonomous systems, we set up the robotics and autonomous Systems Business (raSB) to drive innovation and growth, optimise resource allocation and grow our presence in the target segments of transportation, hospitality, healthcare and logistics.

we launched StrOBO, a new suite of logistics automation systems for complete turnkey solutions that can be customised to the needs of warehousing, manufacturing, sea and airport operations. the StrOBO range includes a family of fully autonomous Material Handling equipment and

facial recognition capabilities, the security robot patrolled both indoor and outdoor areas of Suntec City Mall, and complemented the summit’s tight security measures.

we continued to make headway in the healthcare and hospitality segments. One of our customers, reading Healthcare, was awarded the 2018 Spotlight award by the association for Healthcare Foodservice for their innovative deployment of tug® robots to improve costs, efficiency and patients’ satisfaction. the tug® robots helped to deliver meals to a new building located at the far end of a 46-acre main campus, and expanded the delivery routes to twice the number of beds.

StrOBO Security robot

The STROBO Security Robot leverages our AI and robotic autonomous capabilities to detect anomalies in the environment.

unmanned guided vehicles that are safe, efficient and ideal for routine and repetitive material handling tasks. in addition to the pallet truck, pallet stacker, tow tractor and forklift, customers can look forward to adding the very narrow aisle lifter to their new fleet. the successful development of the StrOBO suite of products is an indication of our engineering capabilities.

leveraging the sector’s artificial intelligence and robotics autonomous capabilities, the StrOBO Security robot made its debut during the 33rd aSean summit at Suntec Singapore Convention Centre in november. with its 360-degree surveillance and

50 ST ENGINEERING

the latest tug®, t4, can mount up to 120kg payloads.

the autonomous mini-bus is undergoing on-road tests to prepare for the public trial in Sentosa.

we also made strides in Singapore where we secured several proof-of-concept projects for local hospitals. Other ongoing projects included the implementation of the autonomous transportation of linen and automated tracking of linen inventory by the tug® robots for three hotel pilot users - Capri By Frasers Changi City, Four points by Sheraton and grand Copthorne waterfront.

in anticipation of customers’ needs, we developed and launched the t4, a cost-effective smaller and faster tug® autonomous Mobile robot (aMr). the open platform of the t4 allows flexibility to mount payloads below 120kg. the t4 is targeted for delivery in the first half of 2019. the year also marked a milestone in the development of autonomous vehicles (avs) for us as we began on-road testing of our autonomous shuttles on Sentosa, a resort island in Singapore. the trial began on a 1km stretch of service road at tanjong Beach,

and was progressively extended to a 2km route linking the palawan and Siloso beaches. the trial involved the testing of operational systems and safety protocols in preparation for the public trial in 2019.

in building a robust av platform, we invested in and partnered Saferide, a specialist in automotive cybersecurity, to provide a comprehensive cybersecurity suite to safeguard the integrity and security of the av systems. Saferide’s vSentry will complement our in-house cybersecurity capabilities to offer anomaly detection and cyberthreat prevention for connected and autonomous vehicles.

we also formed a partnership with San Francisco-based transportation platform provider rideOS to develop a collaborative framework for an on-demand mobility system to manage a city’s transportation system end-to-end. rideOS’ software includes real-time av routing, estimated time of arrival calculations, dispatch services, supply positioning, multi-rider trip planning and fleet management dashboards.

Combined with our in-house av platform capabilities, these collaborations will bring us closer to operationalising autonomous platforms safely in Singapore’s urban, mixed traffic environment.

we also took a step forward in preparing for road trials of the 40-seater autonomous buses for Singapore’s land transport authority (lta). an SBS transit training bus, fitted with sensors and cameras, was deployed on various routes for over

six months to collect information on bus operations under various traffic and weather conditions. the data collected will be used to calibrate the perception algorithm for the actual autonomous buses. in 2019, the autonomous buses, which are 12m long with maximum speeds of 60km/h, will be deployed on feeder bus routes over 42 months in three phases.

Commercial Business and Specialty Vehicleswith our strong track record in delivering quality vehicles, we were awarded a contract by lta to deliver 111 two-door double-deck Man buses. the buses meet the latest euro 6 diesel standards and are part of lta’s efforts to replace Singapore’s ageing bus fleet with cleaner and more efficient buses. the buses will be delivered progressively from 2019, with the final bus to be delivered in 2020. Man buses form about one quarter of the entire public city bus fleet currently in Singapore, with us as the sole distributor. we also delivered various improvements to the buses, such as the advanced Driver assistance System to alert bus drivers of persons or objects in their blind spots.



in addition, we responded to lta’s efforts to electrify Singapore’s bus fleet and was one of three contenders to be awarded the first-ever contract to supply electric buses for trial in the second quarter of 2020. Besides buses, we registered the delivery of our 1,000th Man truck during the year.

acknowledging our expertise in MrO, advanced testing and diagnostics expertise in specialty vehicle platforms, Bombardier transportation appointed us as its Singapore Service Centre. this is a first for us, and an important milestone in building reliable in-country support for Singapore's rail transport operators. Our complementary capabilities in robotics, condition monitoring and predictive maintenance also offer possibilities for innovative engineering applications to improve the efficiency and reliability of rail operations. One notable product launched in 2018 was the world’s first unmanned rail tunnel inspection vehicle, a modular and transportable platform which can detect and locate tunnel cracks more than 0.3mm in length.

Our u.S. operations turned in positive performances in 2018, notwithstanding the challenging environment in the u.S. resulting from various tariffs.

as part of our ongoing review and portfolio rationalisation of ongoing businesses so as to focus resources on strategic growth areas, we divested our specialty vehicles business in india in 2018.

INduSTRy ouTlook

Defencethe evolving geopolitical environment, shifts in economic conditions and increasing operational demands are driving changes in priorities for defence spending in many countries. while terrorists and insurgents remain a threat, the focus on rebuilding conventional warfighting capabilities has re-emerged, with increasing reinvestment in fighting platforms as well as command and control, communications, computers, intelligence, surveillance and reconnaissance.

increasingly, many armed forces around the world are looking at how they can systematically harness innovation to meet operational challenges and rationalise force sizing, shaping and resourcing.

the u.S. and europe remain important export markets. For its fiscal year 2019, the u.S. has announced a budget of more than uS$700b to invest in and accelerate the modernisation of key capabilities to develop the u.S. military into a more capable, lethal and ready Joint Force.

in May, the european union (eu) announced that it has allocated €500m in 2019 and 2020 to the european Defence industrial Development programme to foster the pan-eu development of defence systems, technologies and equipment needed to address common defence and security challenges.

as a result, consolidation in the defence industry is expected to continue as large defence

players rebalance portfolios and merge in order to increase their capabilities and enhance their competitive positions. this move is driven by an increased demand for cross-border development of common defence platforms to share development costs and enhance interoperability.

Furthermore, non traditional players outside the defence industry, particularly it companies, are challenging defence companies in the technology and cybersecurity domains. these include services and products related to manufacturing engineering, service lifecycle management and sourcing. increased competition could also be the impetus for defence and technology players like us to leverage digital technologies for industry 4.0 for their solutions and products.

extend market reach with the launch of StrOBO and tug®

With STROBO and TUG®, we now have a suite of automation solutions for the warehousing, logistics, healthcare and hospitality industries.

52 ST ENGINEERING

we remain driven to meet our customers’ needs and continue to offer our strong portfolio of armoured platforms, weapons and ammunition for defence programmes and counter terrorism as well as humanitarian assistance and disaster relief efforts. Our new solutions already incorporate advanced technologies that are necessary for tomorrow's digital battlefield such as robotics, manned-unmanned teaming, to enable and empower the individual warfighter. we are also incorporating robotics and digital technologies such as 3D printing and data analytics, into the design and manufacturing processes.

Commercialpublic trials for the autonomous shuttle service on Sentosa island in Singapore will begin in mid-2019. Besides demonstrating its on-demand capabilities, the three-month trial will provide valuable data and feedback from the on-the-ground implementation to refine solutions for future deployment. in a separate trial, we expect the 40-seater autonomous buses to acquire av road-worthiness qualification and commence demonstrations on Jurong island, Singapore.

Our robotics business will continue our customer-centric approach in the design and development of our solutions, addressing both the existing pain points and the future needs of its target customer segments. we will work towards building up our StrOBO track record in target industry segments – warehousing, manufacturing, seaports and airports, through participation in key urban logistics projects. in the increasingly competitive aMr space, we will continue to develop high-value variants of the leading tug® family of aMrs.

Orders for city buses secured in 2018 will be delivered in 2019 till 2020. in addition to electric bus operational

trials, we expect to support the testing of conversions of mid-life diesel buses to all-electric systems.

in rail engineering, we expect to continue developing key capabilities for comprehensive rail systems and component maintenance to support rail transport operations.

internationally, trade tensions between u.S., asia and europe may lead to higher tariffs and more trade uncertainties. On the other hand, strong economic growth and necessary investments in a broad segment of u.S. infrastructure will drive market growth for the medium term for our u.S. specialty vehicle companies. in the longer term, infrastructure demands of Smart Cities will add new opportunities for growth in the road construction business segment.

kEy focuS IN 2019

1.pursue and deliver a proven suite of platforms and weapon systems to local and overseas defence acquisition programmes.

2. incorporate robotics and digital technologies into the design of our portfolio to meet customers’ future needs.

3.grow and expand robotics and autonomous Systems business, and build track record in target segments.


Despite strong headwinds, the Marine arm is well-positioned to pursue growth as a niche player with strong and deep engineering capabilities in large scale projects.


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we have commenced development of the CoSCruB,which is a combined scrubber for SOx and NOx that complies with IMO emission standards.

2018 REvIEw

the year 2018 has been a combination of challenges and opportunities for our Marine business. Capacity overhang continues to weigh down the shipbuilding market; and the downside risks to global growth have heightened as a result of trade tensions. Our focus on niche markets and products paid dividends when we clinched several shipbuilding contracts in 2H2018. we maintained our investments in r&D to pursue innovation and technologies as our key differentiator. During the year, the american Bureau of Shipping (aBS) awarded the Certificate of Design assessment to our in-house nerva Ship Management System (nerva SMS). we incorporated sensemaking systems into our SMS (nerva SMS2) to make our systems on board vessels smarter. we also expanded the application of nerva SMS2 to water and wastewater treatment plants, where operators can leverage condition-based monitoring data analytics and machine-learning techniques for predictive diagnostics and

decision support. we have commenced development of the CoSCruB which is a combined nOx and SOx abatement solution which complies with international Maritime Organisation’s (iMO’s) new emission requirements.

Over the years, we have progressively invested in efforts to digitise our yard for optimal operational efficiency and productivity. we added a robotic gantry welding, machine for block welding, thereby reducing manhours per tonne for our steel work. we adopted a product lifecycle management software as a single, digital depository of information and processes throughout the shipbuilding lifecycle, enabling seamless information sharing essential for informed decision-making. we will continue on this journey towards building a smart digital yard to be best placed to take advantage of the upswing in the market when the industry turns.

we are focused on project execution and delivering on our promises. we achieved significant milestones in ongoing shipbuilding programmes. we continued to diversify our ship repair business, adding more superyacht repairs to our portfolio. Our rig repair business, though young, gained good traction in terms of customer enquiries and we completed several rig decommissioning projects and rig repair, upgrades and maintenance works during the year. we also made good progress in existing

environmental engineering projects.

Our roll-on/roll-off passenger-freight vessel took up a new assignment in September. the vessel now serves the gdańsk-nynäshamn line under the name of M/F Nova Star and cruises along the Baltic and north Sea.

we participated actively in prominent trade exhibitions including the Singapore airshow, SMM in Hamburg, germany, and Offshore South east asia (OSea) in Singapore. we demonstrated industry thought leadership with speaking engagements at international conferences including warships and Opv latin america and the Dynamic positioning asia Conference. these platforms gave our business leaders the opportunity to engage with customers, business partners and trade visitors to understand their needs in depth, and exchange ideas on market trends and developments.

ShIpbuIldING

we celebrated several project successes with customers including the republic of Singapore navy (rSn), the Singapore Civil Defence Force (SCDF), Crowley Maritime Corporation (Crowley), the virginia Department of transportation (vDOt), Bouchard transportation (Bouchard) and Quality liquefied natural gas transport (Q-lng).

we laid the keel of the eighth littoral Mission vessel (lMv), and launched the sixth and seventh lMvs, named Fortitude and Dauntless respectively, for rSn during the year. together with the rSn and the Defence Science & technology agency,



Singapore’s Minister for Defence ng eng Hen (centre) visited Marine’s showcase at Singapore airshow 2018.

we designed and constructed eight 80m independence-class lMvs that are versatile and capable of multi-missions to meet the increasing demands of seaward defence. we are on track for programme completion in 2020.

Our Singapore yard and its consortium partner, penguin international, designed and commenced construction of three vessels – the Heavy Fire vessel, the Heavy rescue vessel and the Marine rescue vessel for the SCDF in 2017. when completed, the Heavy Fire vessel will be the first firefighting vessel designed and built in Singapore and the world’s first firefighting vessel (by vessel size) classified to Fi-Fi iiii by aBS for its outstanding firefighting capacity and capability.

in the u.S., our shipyard successfully delivered El Coqui and Taino, which are among the world’s first Combination Container roll-on/roll-off (Conro) ships powered by liquefied natural gas (lng), to Crowley in July and December respectively. these two u.S.-flagged, Commitment-class Conros are expected to transport up to 300 refrigerated containers and a mix of about 400 cars and larger vehicles in the enclosed and weather-tight ro/ro decks between

Jacksonville, Florida and San Juan, puerto rico. the Conros have been lauded as shining examples of the technological innovation that will drive the future of the maritime industry.

Our shipyard in the u.S. also launched Powhatan, a 499-passenger/70-vehicle ferry from its pascagoula facility in Mississippi in the second half of 2018. Powhatan is an addition to the Jamestown-Scotland Ferry fleet managed by the vDOt, which is the only 24-hour, state-run ferry in virginia. the u.S. team also laid the keel for america’s first lng articulated tug and Barge (atB) unit in

the lMv Dauntless at the launch event in august.

we launched the sixth and seventh lMv,Fortitude and Dauntless respectively, for RSN in 2018.

May. we are on track to deliver this lng atB to Q-lng in 2020 before it is deployed to support Shell trading (u.S.) Company’s lng fuel transport to various ports in Florida and the Caribbean. Construction of Evening Breeze, an aBS-class tug for Bouchard, plus another atB tug, are underway and remain on schedule for delivery in 2019 and 2020 respectively.

we ended the year on a high note, with a series of defence and commercial newbuild orders.

in Singapore, we were awarded a contract for the design, construction and maintenance

56 ST ENGINEERING

we designed and constructed Powhatan, a 499-passenger/70-vehicle ferry operated by the vDOt.

of Fast patrol Boats for the Singapore police Coast guard. Construction of the Boats is expected to commence in mid-2019.

the u.S. Department of the navy awarded vt Halter Marine several contracts, including one to design and construct two auxilliary personnel lighter Small (apl(S)) apl-67 Class Berthing Barges, with the option of another four, and another for the engineering and procurement service to support the new t-agS 67 Oceanographic Survey Ship for naval Sea Systems Command. we were also awarded a contract to design and construct two logistics Support vessels for a foreign government.

On the commercial front, we were awarded a contract for engineering design, procurement and construction of a 145Mw floating power barge by Seaboard Corporation subsidiary transcontinental Capital Corporation (Bermuda) ltd., an independent power producer with operations in the Dominican republic. in addition, we announced order wins from Bouchard and Q-lng. these contract wins amidst a challenging market speak volumes of the trust and confidence that our customers have in our capabilities.

ShIp, RIG ANd RElATEd REpAIRS

Competition for repair, conversion and upgrade works intensified as price competition remained stiff. that said, we specialised in dredgers, livestock carriers and tankers repair works and continued to receive healthy levels of enquiries for these vessel types. we completed a wide range of repair and upgrade works for bunker tankers,

research vessels, support vessels, dredgers, tankers and livestock carriers in Singapore and the u.S..

Our expansion into superyacht repairs has also yielded encouraging results. we completed five superyachts with a few more in the pipeline.

One year post-acquisition, our rig repair business in the u.S. reported good progress in terms of project execution and business opportunities. we increased marketing efforts to publicise our key competencies. these active engagements allowed us to build upon our relationships with prominent drillers and operators such as rowan Companies, Helix energy Solutions, enterprise Offshore Drilling and Diamond Offshore Company, which opened doors to opportunities including first rights for tender bids.

notably, we concluded a turnkey engineering, fabrication and installation project for the pOSH Xanadu accommodation semi-submersible, upgraded its walk-to-work gangway pedestal and tower staircase, and installed a new safety system and refuelling modules on the helideck.

we also performed maintenance services for the Helix energy

Solutions group’s Q5000 well intervention semi-submersible, which includes an underwater inspection in lieu of dry-docking (uwilD) regulatory survey and maintenance support for the rig’s equipment.

ENvIRoNMENTAl ENGINEERING

the group has identified Smart City as a growth lever and the Marine sector participates through our expertise in delivering large scale sustainable solutions. we want to be a prominent contributor to the water, wastewater and solid waste management industries and we have been working to build our record of accomplishments in these disciplines across asia.

we were awarded a contract in 2012 to design, build and operate a pneumatic waste Collection System (pwCS) in the tianjin eco-City on a design, build, operate, own and transfer model. in 2018, we reached a new milestone as we entered

we won a contract for the engineering design, procurement and constructionof a 145MW floating power barge that will be used as a power generating facility.



the operations and maintenance phase of the project.

Construction of the Jurong island Desalination plant (JiDp) in Singapore kicked off in august. the Marine sector formed an engineering, procurement and Construction consortium with tuas power and the consortium set up a 40:60 joint venture to undertake the subsequent operations and maintenance aspects of the plant for a concession period of 25 years from 2020. in november, the sector was awarded a contract to provide mechanical and electrical systems for the JiDp.

INduSTRy ouTlook 2019

Overall, the marine industry is cautiously optimistic that 2019 could bring about improved market conditions. in the u.S. gulf of Mexico, oil production is expected to rise which hopefully will translate into more rigs and offshore support vessels being utilised.

the year will also see disruptions that will arise from new environmental regulations affecting the maritime industry such as the 2020 iMO fuel sulphur regulation.

Shipbuildinggearing up for a better outlook, we will look to delivering existing shipbuilding contracts and winning new ones in the commercial and defence areas globally to drive growth in 2019. However, vessel overcapacity coupled with a continued lack of financing for ship owners could jeopardise this effort.

after the successful delivery of the second Conro, Taino in December 2018, to be followed by the SCDF's Heavy Fire vessel in 2019, we will continue to focus on marketing customised and niche vessels such as wind farm support vessels, fishery vessels, dredgers, clean fuel vessels and superyachts.

the demand for lng/lpg-powered vessels will continue to increase with the impending iMO 2020 fuel sulphur regulation. we will continue to capitalise on our experience and expertise acquired from the design and construction of the two dual-fuelled Conros as well as the 4,000 cbm lng atB Bunkering Barge programme in the u.S. to market and secure more orders in this segment. in Singapore, we are designing and building a 145Mw power Barge that utilises clean lng to produce power for consumption in the Dominican republic.

Building upon our experience and historical success in High Speed aluminium vessels, we are expanding our focus to target both defence and commercial opportunities of such vessels. with the increasing global demand for Crew transfer vessels, High Speed passenger and ropax Ferries, and the continuing demand for fast military and paramilitary craft, we are expanding our product portfolio to offer customisable market leading solutions.

For the defence segment, we are seeing an increase in demand for in-shore and off-shore patrol vessels and will continue to focus on the patrol vessel market in 2019. this is largely driven by the need for heighten maritime security to maintain sea lines of communication.

recognising the potential and the growing interest in autonomous vessels, we have built up capabilities to provide unmanned maritime solutions for commercial and naval applications. From design and build to conversion of existing manned vessels into autonomous vessels, we are able to provide a full suite of solutions to fulfil the different needs of our customers.

pOSH Xanadu is an accommodation rig deployed in the gulf of Mexico to support Chevron’s Big Foot project.

Construction work on the JiDp, Singapore's fifth desalination plant, commenced in august 2018. the facility is expected to be operational from 2020.

58 ST ENGINEERING

Ship Repair and Designas for defence shipbuilding, we will remain steadfast in delivering cutting-edge high-tech naval platforms that offer great versatility for navies and coast guards. these include unmanned vessels, fast patrol boats, patrol vessels, landing platform docks for humanitarian assistance as well as multi-role combat vessels. we pledge to provide continuous quality refit services and long-term lifecycle support services to the navies.

For ship repair in Singapore, we are seeing more enquiries from tanker operators in addition to the dredging and offshore sectors. there is also an increase in tender for marine structure work, structural modules for jack-ups and living quarters for offshore. For conversion, we are focused on small/medium lng carriers, powerships and exploration vessels to feed growing market demand.

the repairing of tank barges and extension programme on navy vessels will be a focal area in the u.S.. in rig repair, we will continue to be influenced by fluctuating oil prices but the current focus will be on upgrading rig drillers with passive heave compensators to support drilling activities in gulf of Mexico. we are in a good position to benefit from the recovery should the trend translate into asset reactivations, conversions and upgrades.

we will continue to leverage our unique position and key competitive advantage as one of the few shipyards in the world with a complete through-life cycle support programme, from ship design and building, to ship repair, upgrade, maintenance and integration. we have a product and solution division that delivers ship management solutions and sensemaking system, using technologies in data analytics and artificial intelligence. in addition, we also have a specialised team and facilities equipped with comprehensive engine overhaul and testing services

to provide one-stop engine repair and maintenance services.

Environmental Engineeringas Singapore transforms itself into a smart nation, our focus will continue to be on water and wastewater treatment, and waste-to-energy projects. in the near future, we want to be known as a prominent Design-Build-Own-Operate (DBOO), engineering, procurement & Construction (epC) and Operations & Maintenance (O&M) player in sea water desalination, newater and solid waste treatment. Having taken a first step with the DBOO of the JiDp, we will continue building on our track record in these disciplines towards projects of even grander scale in and outside Singapore.

Spearheading the Future of the Maritime Industryin 2019 and beyond, we expect demand for lng-powered vessels to be higher as the maritime industry adopts new technologies to ensure compliance with regulations to promote a more sustainable marine environment. Backed by our engineering expertise and knowledge in constructing niche vessels, we see opportunities abound. with a solid track record having just delivered the two Conros, El Coqui and Taino, as well as the ropax Nova Star, we are confident this new trend bodes well for us.

we will continue to explore other opportunities downstream of the gas value chain and stay highly focused on taking our capabilities in developing smart autonomous vessels to the next level. autonomous operations will gain momentum as one of the key technologies and major technological advancements influencing and shaping the future of maritime operations. we strive towards improving operational efficiency, performance, and navigation safety to drive down operation costs for our customers. this will affirm our position as a global leader in providing innovative and sustainable total solutions.

kEy focuS IN 2019

1.leverage our unique position as one of the few shipyards in the world with a complete through-life cycle support programme, and integrate technology in our solutions to value-add to our customers.

2. Continue to focus on growing our expertise in constructing highly- customised vessels.

3.Continue to hone our expertise in specialised conversions of energy and wind farm support vessels, repair and maintenance of super and mega yachts, upgrading of heavy construction vessels and lengthening of livestock carriers.


FinanCial review

RESIlIENT fINANcIAl RESulTS

the group delivered a resilient set of results and maintained the momentum for new contracts. excluding one-off charges mainly incurred to rationalise our portfolio, the underlying operating performance of our business sectors remained strong.

the group recorded a 3% year-on-year (y-o-y) increase in revenue to $6.70b for FY2018. profit before tax (pBt) grew 1% to $620.7m compared to the prior year, and profit attributable to shareholders (net profit) dropped 2% y-o-y to $494.2m. excluding one-off charges1 of $37m before tax, pBt would have been 7% higher y-o-y at $657.3m, and net profit would have been 9% up y-o-y at $526.8m if prior year’s one-off favourable u.S. tax adjustment of $20m was excluded as well.

economic value added (eva) for the group grew by 1% to $306.0m for FY2018.

the most significant investment transaction for the group during the year was the proposed acquisition of MraS. the acquisition will allow us to scale up our aerospace capabilities by moving into the OeM business of high-value engine nacelle systems. the acquisition was subject to regulatory approvals as at end of 2018.

the group ended the year with a strong order book of $13.2b.

the Board proposes to pay shareholders a final dividend of 10.0 cents per share. together with the interim dividend of 5.0 cents per share paid in august 2018, total dividend for FY2018 is 15.0 cents per share.

fINANcIAl poSITIoN

as at 31 December 2018, the group’s total assets decreased $451m or 6% to $7,573m. the decrease in total assets was due mainly to the Mtn redemption, partially offset by the increase in trade receivables and contract assets for the group’s on-going operations and projects.

2018

2017

ToTAl ASSETS dEployMENT ($m)

property, plant & equipmentintangibles & Other assetsinventories & work-in-progresstrade receivables, Contract assets, Deposits & prepaymentsBank Balances and Other liquid Funds & Funds under Management0 6,0003,000 9,000

ToTAl ASSETS by GEoGRAphyToTAl ASSETS by GEoGRAphy

asiau.S.europeOthers

2018 20172018

2017

68%

64%

19%

19%

11%

15%

2%

2%

1 One-off charges related to portfolio rationalisation, transaction cost of the proposed Mra Systems acquisition and the redemption of uS$500m 4.80% notes. in respect of portfolio rationalisation, the group incurred divestment losses in our pilot training school in the u.S. and road construction business in india, full impairment charges for the road construction business and automotive MrO business in Brazil, partially offset by divestment gains of a 5% stake in a joint venture with guangdong airport authority in China and a joint venture with airbus Helicopters in Singapore.

Comparative figures were restated on the adoption of Singapore Financial reporting Standards (international) (SFrS(1)) with effect from 1 January 2018.

60 ST ENGINEERING

cApITAl EXpENdITuRE

in FY2018, the group invested $335m (2017: $273m) in capital expenditure, of which about 93% or $311m was deployed for capacity expansion to support growth opportunities, such as our new composite

cApITAl EXpENdITuRE by SEcToR

2018

2017

45%

66%

22%

16%

11%

11%

16%

3%

6%

4%

manufacturing plant and new aircraft hangar in germany for the aerospace sector, and a building expansion in west of Singapore for our electronics sector. we also funded the purchase of two aircraft for our aircraft leasing business.

2018

2017

cApITAl EMployEd ($m)

0 2,000 4,0003,0001,000 5,000

BorrowingsequityOthers*

* Others include adjustments for foreign currency translation, present value of leases, etc.

the average capital employed in FY2018 was $4,051m, a decrease of $386m from $4,437m in FY2017. the reduction came from lower borrowings after the Mtn redemption during the year.

aerospaceelectronicsland SystemsMarineOthers

2018 2017

cApITAl EXpENdITuRE by GEoGRAphy

2018

2017

48%

42%

27%

9%

23%

48%

2%

1%

asiau.S.europeOthers

2018 2017


FinanCial review

TREASuRy MANAGEMENT

St engineering operates internationally and is exposed to financial risks, comprising foreign exchange, liquidity, interest rate and credit risks. the group recognises that prudent management of financial risks is important and has established treasury policies and guidelines to mitigate them. the treasury policies and guidelines are revised to reflect changes in the operating environment.

treasury activities are actively managed through the group’s wholly owned treasury entity, St engineering treasury pte. ltd. to ensure effective management of the group’s liquidity and financial risk exposures. During the year, the group implemented an electronic trading platform and a treasury management system with straight through processing coupled with an in-house bank model.

On 16 July 2018, the group completed its early redemption of uS$0.5b 4.80% notes due 2019 guaranteed by St engineering and issued under its uS$1.2b Multicurrency Medium term note (Mtn) programme. the group’s capital employed was immediately reduced as a result of the early redemption of these notes. to fund future growth as the

need arises, the group continues to be able to tap into financing with competitive terms.

Banking Facilities the group has banking facilities of approximately $16.0b (2017: $15.4b) as at 31 December 2018 to support business operations in the areas of trade finance, hedging and credit.

as at 31 December 2018, the group has utilised $3.8b or 24% of its total available facilities (2017: $3.9b or 25%) with $12.2b or 76% (2017: $11.5b or 75%) remaining available.

Foreign Exchange the group has receivables and payables denominated in foreign currencies. where possible, the group offsets currency exposures across its business units before hedging remaining currency exposures in the market via foreign exchange forward contracts. the main currencies transacted in 2018 for the group were uSD and eur.

During the year, the group engaged in approximately $2.5b (2017: $1.5b) equivalent of foreign exchange transactions. as at 31 December 2018, $1.1b (2017: $0.9b) remained as outstanding foreign exchange transactions.

bANkING fAcIlITIES ($b)

AVAILABLE 2018

UTILISED 2018

AVAILABLE 2017

UTILISED 2017

trade FinanceForeign exchangeinterest rates Swaps & Cross-Currency Swapsloans0 4 128 16

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44% 62%

boRRowING pRofIlE by MATuRITy ($m)

2018

2017

0 400 800600200 1,000 1,200

< 1 year1 to < 2 year2 to < 3 years> = 3 years

44% 73%

boRRowING pRofIlE by fIXEd ANd floATING RATES ($m)

2018

2017

0 400 800600200 1,000 1,200Fixed rateFloating rate

64% 85%

boRRowING pRofIlE by cuRRENcy ($m)

2018

2017

0 400 800600200 1,000 1,200

uSDSgDeurrMB

Liquidity the group’s cash and cash equivalents, including funds under management, stood at $0.4b as at 31 December 2018 (2017: $1.3b). the decrease was mainly attributed to the early redemption of outstanding notes issued under the Multicurrency Mtn programme.

Funds under management, which had been invested in SgD and uSD fixed income instruments, were liquidated in 2018 to partially fund the above redemption.

Borrowings with the early redemption of the outstanding notes, the group’s borrowings were reduced to $0.5b as at 31 December 2018 (2017: $1.1b), comprising short-term and long-term loans from banks, lease obligations and other loans. these debt obligations were taken out to support the group’s operations and included the following currencies and proportion of debt: 64% in uSD, 16% in SgD, 16% in eur and 4% in rMB.


dEbT RATIoS

Interest Cover Ratios the group’s interest cover ratio decreased to 13.7 times in FY2018 (2017: 14.2 times). the lower interest cover was due to higher interest expense even though higher pBt were recorded in FY2018.

Net Debt/Equity Ratenet debt/equity ratio increased from 0.1 times to 0.2 times in 2018 from lower net cash from operating activities, higher investment in property, plant and equipment and additions to intangible assets.

2018 2017 2016

net Debt ($m) 413 146 59

equity ($m) 2,535 2,496 2,428

net Debt/equity ratio 0.2 0.1 0.0

FinanCial review

(246)

(65)

Investing Activities

(390)

(1,161)

Financial Activities

764

639

Operating Activities

20182017

cASh flowS ($m)

INTEREST covER

605

42.644.9

617

2017 2018

pBt before associates / Joint ventures and interest expense ($m)interest expense ($m)interest Cover (x)

14.2X13.7X

cASh flowS

Operating Activitiesthe group generated net cash of $639m from its operating activities as compared to $764m in FY2017. the decrease in net cash from operating activities was due to increase in trade receivables and contract assets for the group’s on going operations and projects, partially offset by higher operating profits generated in FY2018 and higher trade payables.

Investing Activitiesnet cash used in investing activities of $65m in FY2018 arose mainly from the group’s investment in property, plant and equipment by aerospace ($221m), electronics ($54m), land Systems ($37m), Marine ($10m) sectors and Others ($14m), and additions to intangible assets ($115m), partially offset by proceeds from sale of investments ($375 million).

Financing Activitiesnet cash used in financing activities of $1.16b in FY2018 was mainly attributable to the Mtn redemption ($681m) and payment of FY2017 final dividend and FY2018 interim dividend ($468m).

the group ended the year with cash and cash equivalents (CCe) of $414m, a decrease of $583m from FY2017.

64 ST ENGINEERING

TAX

the group’s effective tax rate for 2018 is 17%. this is similar to the group’s effective tax rate for FY2017 of 17% after excluding the impact from the re-measurement of deferred tax balances due to the u.S. tax reform.

SIGNIfIcANT AccouNTING polIcIES

the group’s financial statements are prepared in accordance with Singapore Financial reporting Standards (international) (SFrS(i)). these are the group’s first financial statements prepared in accordance with SFrS(i) and SFrS(i) 1 First-time Adoption of Singapore Financial Reporting Standards (International) has been applied. in preparing the opening SFrS(i) balance sheet, the group has adjusted amounts reported previously in the financial statements prepared in accordance with previous FrS.

an explanation of how the transition from previous FrS to SFrS(i) and the adoption of SFrS(i) 9 and SFrS(i) 15 have affected the group’s balance sheet, income statement and cash flows is set out under notes to the Financial Statements, note g2.

the group has applied the same accounting policies and methods of computation in the preparation of the financial statements’ opening SFrS(i) balance sheet as at 1 January 2017 for the purposes of transition to SFrS(i) for the current reporting period. the significant accounting policies are presented at the end of each notes to the Financial Statements (pages 154 to 274).

ToTAl ShAREholdER RETuRN

the group ended the year with $414m of cash and cash equivalents post-Mtn redemption. St engineering paid an interim dividend of 5.0 cents per share to shareholders in august 2018 and will recommend a final dividend of 10.0 cents per share to shareholders at the forthcoming annual general Meeting. the total dividend per share (DpS) for FY2018 is 15.0 cents. Based on the average share price of $3.375, the DpS of 15.0 cents translates to a dividend yield of 4.4%.

St engineering’s share price at the end of 2018 was $3.49, a 7.1% increase as compared to the prior year. Over the same period, the corresponding benchmark Straits times index (Sti) declined by 9.8%. with a dividend yield of 4.4%, shares of St engineering generated a total positive shareholder return of 11.5%.

4.4

7.14.7

(11.5)

(14.1)

4.1

(10.0)

(6.8)

12.1

5.5

11.5

2014 2015

7.3

4.8

2016

4.6

2017 2018

0.9

Dividend YieldCapital gain

ToTAl ShAREholdER RETuRN (%)


EcoNoMIc vAluE AddEd (EvA)

the group’s FY2018 eva attributable to shareholders of $306.0m was 1% or $2.2m higher than that achieved in FY2017. the increase in eva was mainly attributable to lower capital charge, partially offset by lower net operating profit after tax (nOpat).

EvA Statement 2018$m

2017 $m

net profit before tax 571.7 562.5

adjust for:Share of results of associates and joint ventures, net of tax 49.1 49.3

interest expense 54.5 53.2

Others 2.6 8.2

adjusted profit before interest and tax 677.9 673.2

Cash operating taxes (note 1) (127.0) (110.8)

Net operating profit after taxation - (a) 550.9 562.4

average capital employed (note 2) 4,051.0 4,436.5

waCC (note 3) (%) 5.7 5.7

capital charge (230.9) (252.9)

adjustment to capital charge (note 4) (11.6) (2.6)

Adjusted capital charge - (b) (242.5) (255.5)

EvA - [(a) - (b)] 308.4 306.9

non-controlling interests’ share of eva (2.4) (3.1)

EvA attributable to shareholders 306.0 303.8

note 1: the reported current tax is adjusted for the statutory tax impact of interest expense.

note 2: Monthly average equity plus interest bearing liabilities, timing provision and present value of operating leases.

Major Capital Components:

$m

Borrowings 1,079.2

equity 2,615.4

Others 356.4

4,051.0

note 3: the weighted average Cost of Capital is calculated in accordance to St engineering group eva policy as follows: i) Cost of equity using Capital asset pricing Model with market risk premium at 5.0%; ii) risk-free rate of 2.02% (2017 @ 2.35%) based on yield-to-maturity of Singapore government 10 years Bonds; iii) ungeared beta at 0.71 (2017 @ 0.71) based on St engineering risk categorisation; and iv) Cost of debt at 3.66% (2017 @ 3.37%) using actual cost of debt of the borrowings in uS, europe,

China and Singapore.

note 4: adjustment on deferred capital charge on some acquisitions.

FinanCial review

66 ST ENGINEERING

vAluE AddEd

the group’s total value added for FY2018 of $2,936m was 3% higher as compared to that of FY2017.

value Added Statement 2018$m %

2017$m %

2016$m %

2015$m %

2014$m %

value added from:revenue earned 6,697.9 6,521.1 6,683.7 6,335.0 6,539.4

Bought in materials and services (3,857.1) (3,778.4) (3,942.3) (3,792.5) (4,022.0)

2,840.8 2,742.7 2,741.4 2,542.5 2,517.4

Other income 35.0 38.7 67.8 55.4 40.2

Finance income 22.3 38.7 33.7 56.2 43.5

Finance costs (exclude interest expense) (11.0) (15.0) (3.3) (10.1) (7.3)

Share of results of associates and joint ventures, net of tax 49.1 49.3 63.8 58.3 57.2

Total value added 2,936.2 2,854.4 2,903.4 2,702.3 2,651.0

distribution of total value addedto employees in wages,

salaries and benefits 2,001.2 68 1,945.1 68 1,941.0 67 1,807.7 67 1,739.2 66

to government in taxes and levies 126.7 4 107.1 4 119.2 4 118.4 4 136.5 5

to providers of capital on: •Interestpaidonborrowings 44.9 2 42.6 1 42.4 1 39.7 2 37.9 1

•Dividendstoshareholders 468.0 16 467.6 16 465.9 16 497.6 18 498.8 19

2,640.8 2,562.4 2,568.5 2,463.4 2,412.4

balance retained in businessDepreciation and amortisation 244.0 217.0 247.3 187.3 170.5

retained profits 28.2 35.1 58.9 36.3 48.2

non-controlling interests 22.2 23.5 8.3 2.6 5.0

294.4 10 275.6 10 314.5 11 226.2 8 223.7 8

Non-production costs 1.0 16.4 1 20.4 1 12.7 1 14.9 1

Total distribution 2,936.2 100 2,854.4 100 2,903.4 100 2,702.3 100 2,651.0 100

value added per employee ($) 137,092 132,771 132,131 120,704 116,935

value added per $ of employment costs ($) 1.46 1.46 1.49 1.49 1.52

value added per $ of gross property, plant and equipment ($) 0.76 0.76 0.81 0.78 0.83

value added per $ of revenue ($) 0.44 0.44 0.43 0.43 0.41


5-year key financial data 2018 2017 2016 2015 2014

Income Statement ($m)revenue 6,698 6,521 6,684 6,335 6,539profit

eBitDa 814.3 759.8 718.4 697.6 725.5eBit 570.3 542.8 471.1 510.3 555.0pBt 620.7 611.8 590.6 630.3 650.7net profit 494.2 502.6 484.5 529.0 532.0

balance Sheet ($m)property, plant and equipment 1,743 1,719 1,670 1,709 1,578intangible and other assets 1,716 1,675 1,570 1,370 1,311inventories and work-in-progress 1,184 1,082 1,898 1,943 1,802trade receivables, contract assets,

deposits and prepayment 2,516 2,199 1,824 1,694 1,916

Bank balances and other liquid funds and funds under management 414 1,349 1,403 1,453 1,712

Current liabilities 3,851 3,587 3,801 3,720 3,716non-current liabilities 1,187 1,941 2,120 2,188 2,339

Share capital 896 896 896 896 889treasury shares (9) (23) (44) (67) (6)Capital and other reserves 46 52 57 48 24retained earnings 1,313 1,290 1,274 1,255 1,225non-controlling interests 288 281 262 129 132

financial Indicatorsearnings per share (cents) 15.85 16.13 15.60 17.05 17.06net assets value per share (cents) 72.00 71.09 70.20 68.74 68.38return on sales (%) 7.7 8.1 7.4 8.4 8.2return on equity (%) 22.0 22.7 22.2 24.8 24.9return on total assets (%) 6.8 6.6 5.9 6.5 6.5return on capital employed (%) 13.6 12.7 12.0 14.6 14.0

dividendgross dividend per share (cents) 15.0 15.0 15.0 15.0 15.0Dividend yield (%) 4.44 4.62 4.81 4.68 4.08Dividend cover 1.06 1.07 1.04 1.13 1.14

productivity dataaverage staff strength (numbers) 21,418 21,499 21,974 22,388 22,671revenue per employee ($) 312,724 303,319 304,166 282,965 288,449net profit per employee ($) 23,076 23,379 22,049 23,630 23,464employment costs ($m) 2,007.7 1,951.6 1,947.5 1,813.7 1,745.8employment costs per $ of revenue ($) 0.30 0.30 0.29 0.29 0.27

economic value added ($m) 306.0 303.8 252.4 355.1 344.5economic value added spread (%) 7.6 6.9 5.5 8.7 8.4economic value added per employee ($) 14,285 14,130 11,488 15,861 15,197

FinanCial review

Figures from FY2014 to FY2016 were prepared in accordance with the previous FrS and were not restated on adoption of SFrS(i).

68 ST ENGINEERING

REvENuE ($b)

6.70

6.52

6.68

6.34

6.54

GRoup $6.70b

NET pRofIT ($m)

494.2

502.6

484.5

529.0

532.0

$620.7m $494.2m2018

2017

2016

2015

2014

2018

2017

2016

2015

2014

2018

2017

2016

2015

2014

pRofIT bEfoRE TAX ($m)

620.7

611.8

590.6

630.3

650.7

MARINE

0.57

0.64

0.84

0.96

1.34

45.2

27.0

67.8

85.7

108.1

$0.57b $50.3m $45.2m2018

2017

2016

2015

2014

2018

2017

2016

2015

2014

2018

2017

2016

2015

2014

50.3

22.4

75.1

88.3

122.8

AERoSpAcE

2.65

2.54

2.48

2.09

2.06

320.0

318.5

300.3

290.6

283.0

244.6

244.8

234.4

226.7

220.1

$2.65b $320.0m $244.6m2018

2017

2016

2015

2014

2018

2017

2016

2015

2014

2018

2017

2016

2015

2014

2.14

2.01

1.89

1.71

1.58

ElEcTRoNIcS

186.5

168.8

174.5

163.0

152.1

$2.14b $224.7m $186.5m2018

2017

2016

2015

2014

2018

2017

2016

2015

2014

224.7

200.2

207.8

191.0

184.0

2018

2017

2016

2015

2014

lANd SySTEMS

1.28

1.24

1.39

1.47

1.46

52.9

87.4

25.5

62.6

51.5

$1.28b $62.3m $52.9m2018

2017

2016

2015

2014

2018

2017

2016

2015

2014

62.3

85.0

38.8

73.3

57.8

2018

2017

2016

2015

2014


inveStOrrelatiOnS

as we pursue our aspiration to become a global engineering, defence and technology powerhouse, it is vital for the investing community to understand our longer term plans for informed decision-making.

TRANSpARENcy ANd TIMEly dIScloSuRES

Our website is a repository for corporate information, SgX announcements, news releases, quarterly results reports, annual reports, investor events, stock and dividend information. investors can subscribe to email alerts to receive latest updates on the group or reach out to the investor relations (ir) team through the ‘Contact us’ page or email [email protected].

REGulAR AccESS To MANAGEMENT

During 2018, the management and ir team participated in investor conferences and roadshows in europe, Hong kong, Japan, Singapore and the u.S.. we hosted sell-side analysts and institutional investors at our facilities and trade shows in Singapore, held post-results lunches, one-on-one and group meetings with them to discuss the group’s business strategies, opportunities and challenges.

at every quarter when we announce our financial results, sell-side analysts and media are invited to our results briefings. institutional investors and the public can also participate via

we are committed to regular, clear and open communications with the investing community.

Management shares the group’s five-year plan to strengthen our core businesses while growing international Defence and Smart City businesses on our investor Day.

More than 50 institutional investors and sell-side analysts visited us at Singapore airshow 2018.

live webcasts including taking part in the Q&a sessions online. an archive of the quarterly results webcast, together with the presentation material, are made available on our dedicated ir website on the same day of our results release.

in March, we held an investor Day conference to share our growth targets and five-year plan (2018 -2022). Our management and business leaders interacted with over 60 analysts and institutional investors through business presentations, solutions showcase and a Q&a session at this event. to ensure that retail investors are also apprised of the group’s growth plan, our president & CeO delivered a similar presentation at our 21st annual general Meeting held in april.

we are committed to maintaining a multi-channel ir programme to promote two-way communications with the investing community, and will always explore more ways to enhance our communications to build stronger trust and confidence in us.

70 ST ENGINEERING

11%OtHerS*

* Others include unidentified holdings and holdings below analysis threshold

ShAREholdING by GEoGRAphy

8%eurOpe & uk

3%aSia (excluding Singapore)

10%nOrtHaMeriCa

68%SingapOre

ShAREholdING by TypE

29.6%inStitutiOnal

19.7%retail & OtHerS*

50.7%teMaSekHOlDingS

2018 INvESToR RElATIoNS cAlENdAR

Q1• Singapore airshow 2018• annual management lunch

with sell-side analysts• FY2017 results briefing

with live webcast• post-results investor lunch• St engineering investor Day

Q2• 21st annual general Meeting• 1Q2018 results briefing with

live webcast• DBaccess asia Conference 2018

(Singapore)• investors visit at the aerospace facility• SgX-DBS Singapore Corporate Day

(new York)• non-deal roadshow in Canada and

the u.S.• investors visit at the electronics facility • Citi aSean Conference 2018

(Singapore)

Q3• non-deal roadshow in london• 2Q2018 results briefing

with live webcast• non-deal roadshow in Hong kong• post-results investor lunch• Macquarie aSean Conference 2018

(Singapore)• non-deal roadshow in Japan

Q4• 3Q2018 results briefing

with live webcast• post-results investor lunch• Morgan Stanley asia pacific

Summit 2018 (Singapore)


awarDS

Most Transparent Company Award (Winner for Multi-Industries category) at the 19th Investors’ Choice Awards By Securities Investors Association (Singapore)

Industry Leader of the Year 2018 at the Aviation 100 MRO Global Awards By Airline Economics

Overall MRO of the Year 2018 at the Aviation 100 MRO Global Awards By Airline Economics

Best in Sector (Industrials category) at the IR Magazine South East Asia Awards 2018 By IR Magazine

NS Advocate Award (Large Companies) By MINDEF

(ISC)2 Asia-Pacific Information Security Leadership Achievements (ISLA®) Managerial Professional Award By The International Information System Security Certification Consortium

MRO Management of the Year 2018 at the Aviation 100 MRO Global Awards By Airline Economics

IES Prestigious Engineering Achievements Awards 2018 By Institution of Engineers Singaporeiot-enabled on-demand lighting for the Smart nation

buSINESS EXcEllENcE INvESToR RElATIoNS

pEoplE

(Left) eleana tan, Chief Corporate Officer, receiving the Most transparent Company award on behalf of St engineering at SiaS 19th investors’ Choice awards.

(Right) aerospace president lim Serh ghee receiving industry leader of the Year 2018 award at the aviation 100 MrO global awards.

72 ST ENGINEERING

ASEAN Energy Award (Special Submission Category) By ASEAN Centre for Energy

Best Selling N95 Mask at Watsons Singapore Health, Wellbeing and Beauty Awards 2018 By Watsons Singaporeair+ Smart Mask

Good Design Award 2018 By Japan Institute of Design Promotionaircraft seats

BCA Green Mark Platinum Award (Non-Building Category)By Building and Construction Authority

Install Awards for Education Project of the Year By Installation CES 2019 Innovation Awards Honoree By Consumer Technology AssociationDigiSaFe DiskCrypt M10

Community Chest SHARE Award 2018 By Community Chest19 of the group’s business units received Community Chest awards in the platinum, gold, Silver, Bronze and achiever categories.

Star of Commendation AwardBy Singapore Industrial and Services Employees’ Union

coRpoRATE cITIzENShIppRoducT QuAlITy

Safety & Security Watch Group Outstanding Cluster Award 2018By Singapore Police Force

Safety & Security Watch Group Outstanding Cluster Award 2018 By Singapore Civil Defence Force

WSH Awards Performance 2018By WSH Council, Ministry of Manpower

woRkplAcE SAfETy & hEAlTh

NS Mark Award (Gold) By MINDEF

Total Defence Award By MINDEF

Defence Technology Prize (R&D) Award By MINDEFvenuS unmanned Surface vessel

dEfENcE

20th Annual Safety Award Convention By Land Transport Authority

National WSH Supervisor AwardBy WSH Council

ASMI WSH Innovation Award By Association of Singapore Marine Industries

the team for venuS unmanned Surface vessel, an innovation that performs mine-countermeasure and maritime security measures with reduced manpower and cost, receiving the Defence technology prize 2018 (research & Development) award.


2

Initiated Strategic Workforce Planning for Cybersecurity and Robotics businesses to identify, attract and retain talents needed to deliver our five-year plan

Redesigned our Total Rewards Framework to align with our new business aspirations and strengthen global competitiveness

Launched a new Performance Scorecard to foster enterprise collaboration and realign business focus on growth efforts and operational excellence

In 2018, we launched new initiatives in three focal areas to further shape our workforce and support a world-class and high-performance organisation.

Being at the forefront of people practices

Launched our refreshed Leadership Dimensions and suite of Leadership Development Programmes, anchored in our leadership dimensions, strategic priorities and core values

1 Enhancing capability and capacity for growth

World-class Workforce

Initiated a Technical Career Pathway to deepen our technological and engineering expertise, provide a structured framework for skills upgrade and facilitate career growth opportunities

Reviewed and implemented our refreshed Talent Management Framework including Structured Rotation and Succession Planning

74 ST ENGINEERING

launched a series of initiatives to address issues identified in the 2017 Employee Engagement Survey, with specific focus on empowerment and collaboration

3 Strengthening a passionate and engaged workforce

refreshed and launched our new Employee performance Management programme

Implement a

to support our globalisation thrust

global leaders Development programme

Review and enhance our suite oflearning programmes, including e-learning and microlearning modulesto promote self-development and a lifelong learning culture

2019 TARGETS


REPORT AT A GLANCE

− A summary of our sustainability efforts for the year 2018, including an overview of our initiatives and performance is reported in this section and should be read in conjunction with the information published in the Sustainability section of our website at www.stengg.com;

− Unless otherwise stated, data and activities relate to our Singapore operations only. Information on sustainability efforts relating to our operations in the U.S. is reported on pages 90 to 91;

− Our management approach covering corporate governance, enterprise risk management system and materiality is captured in ‘Our Management Approach to Sustainability’ listed on the Sustainability section of our website;

− Our 2018 Sustainability Report is prepared in accordance to the Global Reporting Initiative (GRI) Standards: Core Option. It is guided by the SGX Reporting Guide as well as the LBG framework;

− The GRI Content Index is also available on our website.

BOARD STATEMENT

Our sustainability strategy involves multiple stakeholder considerations that balance today’s needs with longer term developments. The Board provides oversight through the Risk and Sustainability Committee (RSC), where material Environmental, Social and Governance (ESG) topics are reviewed. The RSC meets quarterly with the management to review and discuss the Group’s risk and sustainability performance. The responsibility for implementing all sustainability efforts rests with the President & CEO of ST Engineering and the Management Committee.

We have built a successful track record in technology,defence and engineering upon good business fundamentals, a commitment to performance with integrity and zero tolerance for fraud and dishonest conduct. We conduct our business in a responsible manner by ensuring that our products not only meet technical specifications and prevailing industry standards, but are also reliable over their life cycles and are safe to produce, operate and maintain. This year, we enhanced our Whistle-Blowing channel, standardising it for local and overseas stakeholders.

Safer Workplace Maintaining a safe working environment is paramount and remains a focus area in our sustainability efforts. Regrettably, we reported a workplace fatality this year. In spite of this, a zero workplace fatality remains our aim, and ever more so. The eight safety cardinal rules we rolled out this year as part of our safety campaign reinforce our collective commitment towards that aim.

Cleaner FutureAs a global technology, defence and engineering group, we are well-positioned to bring technology and innovation together to create solutions that help to further our environmental conservation efforts. This year, we remain on target in our journey towards reducing water, energy use and Greenhouse Gas (GHG) emission.

We conduct our business in a responsible manner by ensuring that our products not only meet technical specifications and prevailing industry standards, but are also reliable over their life cycles and are safe to produce, operate and maintain.

RISK & SUSTAINABILITYHIGHLIGHTS

76 ST ENGINEERING

The Group has zero tolerance for fraud and corrupt practices. During the year, we reviewed and updated our policies and procedures to ensure that key compliance principles from our Code of Business Conduct and Ethics (Code) are embedded into our processes. Reflective of our global workforce, the Code is translated into six languages and readily available on our intranet.

We also carried out a “refresh and remind” exercise on our Code. A handbook was disseminated to all employees, and senior management reiterated key principles of the Code through video messages that are available on our intranet. This sets the tone and underscores our commitment to honest and ethical business conduct.

KEY BUSINESS RISKS

Growth & Competition – Product and technology

obsolescence – Mergers and acquisitions

Ethics & Governance – Cyber risk– Bribery and corruption– Regulatory compliance

Operations– Contract compliance– Business disruption– Product liability and safety

Human Capital– Talent management and

succession planning– Occupational health and safety

Financial– Credit– Foreign exchange

The Group adopts an ERM framework to identify key business risks that act as barriers to achieving its business goals in the short, medium and long term. This includes risks arising from changes and trends on the ESG front.

The ERM framework provides discipline for the Group to identify, assess, control and monitor risks. It sets out a consistent definition of risks and risk tolerance limits to ensure that business units have a common understanding when identifying and assessing risks.

The Group is committed to managing these risks well as part of its long-term sustainability. The RSC oversees management in the identification of risks as well as the implementation of risk management policies and strategies.

Further details on the Group’s risk governance, including the responsibilities of the Board, Audit Committee and RSC, can be found in the Corporate Governance Report from page 94 to 124.

A detailed description of our risks is available on our website.

ANTI-BRIBERY AND CORRUPTION TRAINING IN SINGAPORE

Number of employees trained

% of employees trained

0 02016 2017 2018

3,512 3,531

7,683

52

23

As part of our compliance and ethics training programme, all employees are required to undergo mandatory training on the Code annually. Relevant employees are also required to complete the ABC training course once every two years.

To strengthen our Whistle-Blowing System, we have added reporting hotlines managed by an external independent party to our existing reporting channels. These hotlines, published on our website, cater to both our local and overseas stakeholders. This implementation is part of our ongoing efforts to encourage and facilitate disclosures of possible improprieties or noncompliance in confidence.

More information on our Whistle-Blowing channels are available on our website.

Number of employees trained

% of employees trained

ENTERPRISE RISK MANAGEMENT (ERM) FRAMEWORK

ANTI-BRIBERY AND CORRUPTION (ABC)

1,000

10

20

30

40

50

2,000

3,000

4,000

5,000

6,000

7,000

8,000

11,000

10,000

9,000

23

77ANNUAL REPORT 2018

OUR SUSTAINABILITY PERFORMANCE

World-Class Workforce

WHAT WE DID IN 2018 WHAT WE WILL DO IN 2019

Strengthened our goal setting process and enhanced our performance management framework.

Launched action plans in response to 2017 Employee Engagement Survey.

Implement a Global Leaders Development Programme to support our globalisation thrust.

Review and enhance our suite of learning programmes to promote a self-development and lifelong learning culture.


Safe & Conducive Workplace

Updated procedures to enhance our overall level of preparedness in the event of a terrorist attack.

Raised the GHG emission intensity reduction target to 36% on a business-as-usual basis by 2030, with 2010 as the base year.

Critical workplace safety and health areas like fall prevention, traffic management, industrial machines and hand tools were included in cross audits.

Improved water consumption intensity by 1.5% year-on-year.

Continue to improve our safety performance.

Identify initiatives to improve mental well-being of our employees as part of total workplace safety and health.

Explore opportunities to improve waste management.

Expand solar panel installations to other facilities.

Protecting Our Environment

78 ST ENGINEERING

OUR SUSTAINABILITY PERFORMANCE

WHAT WE DID IN 2018 WHAT WE WILL DO IN 2019

Responsible Sourcing

Developed a Strategic Vendor Relationship Management programme to evaluate and prioritise our vendors.

Established the Vendor Code of Conduct.

Roll out the Vendor Code of Conduct.

Formalise the Strategic Vendor Relationship Management process.

Responsible Corporate Citizenship

Partnered TOUCH Community for its Meals-on-Wheels food delivery programme during the ST Engineering Volunteer Week.

Enhanced the ethics and training programme.

Increased the Group’s participation rate and contribution to SHARE Community Chest’s programme in Singapore.

Formalise framework to promote staff volunteerism.

Review community outreach focus themes.

Extend health and safety reporting regime to U.S. operations.

Continue with initiatives to raise awareness of the Group’s sustainability agenda.

Global Operations: The U.S.

Continued with initiatives to reduce our GHG footprint.


WHAT WE WILL DO IN 2019

PRODUCTIVITY

The pursuit of higher efficiencies and effectiveness is inherent in our day-to-day operations. In 2018, we made strides to enhance our operational performance.

The Shared Service Centre for seven functions comprising Finance, Human Resource, Information Technology, Procurement, Estate and Facilities Management, Corporate Communications and Legal progressed into its second year of implementation. Improvements included a faster turnaround travel and expense claims management system and a more user friendly email system. We also embarked on a project to simplify our legal structure and governance framework with the aim of further streamlining our organisational resources.

At the operating level, the sectors used continuous improvements tools such as Kaizen and Value Stream Mapping to improve their work processes. We revisited our productivity framework and enhanced our approach to manage and monitor productivity projects.

To encourage our employees to be more collaborative and innovative in their day-to-day work, productivity projects that saw great teamwork and yielded significant savings were recognised at our annual Team Excellence Convention.

Productivity is an important cornerstone of our work as we strive towards sustainable growth by continuously improving our systems and processes.


• Implement an electronic Compliance Statutory Monitoring System to track renewal of permits and licences.

• Roll out e-learning modules for continuous improvement tools.

Embracing Industry 4.0 to Enhance ProductivityOne of our Lean initiatives in 2018 was to transform a manufacturing workshop in the Land Systems sector by incorporating Industry 4.0 concepts.

Technicians at the manufacturing workshop would initiate requests for WIP jobs on their handheld devices and robots would be deployed to deliver requested components to requestors.

Production managers would also be able to view operation status on such handheld devices, and informed decisions could be made on-the-go.

Through the use of logistics robots and smart systems, manual touchpoints can be reduced and real-time information necessary for informed decision-making are readily available.

The initiative targets to achieve at least a 20% reduction in manpower and manufacturing lead time.

HIGHLIGHTS

80 ST ENGINEERING


SAFE & RELIABLE PRODUCTS

In 2018, all operations certified to ISO 9001 Quality Management System successfully converted to the latest ISO 9001:2015 standard. At the same time, we adopted a common Quality Policy Statement as part of an overall quality framework review.

We continued to be recognised on the international stage at the 36th International System Safety Conference in Arizona, U.S. where we shared a paper on “Challenges and Benefits of Implementing Hazard Traceability in an Application Lifecycle Management Tool”. We were also invited to speak at several external system safety seminars and remained a key supporter of the Singapore Chapter of the International System Safety Society.

We introduced the System Safety Community of Practitioners in 2018 for like-minded practitioners to share their experiences and lessons learnt.

• Streamline and digitise key quality process workflow for greater efficiency.

• Introduce Quality Community of Practitioners for cross-sharing of experience amongst our quality practitioners.

Annual System Safety SeminarDebuted in 2012, our annual System Safety Seminar is a platform for our business sectors to share and learn about practices, trends and developments in the science of system safety.

The 7th edition of the Seminar held on 23 November 2018 examined industry-specific topics such as the implementation of hazard traceability in lifecycle management, operations risk assessment for unmanned aircraft systems and planning of safety assurance efforts for autonomous land systems.

The annual Seminar is an important meeting point for the exchange of ideas, and to challenge the way we think and practise system safety to produce safer and more reliable products for our customers.

HIGHLIGHTS

QUALITY POLICYST Engineering is committed to the

timely delivery and responsive support of products that remain safe and reliable for their intended use, and the provision of services that meet regulatory standards and satisfy our customers’ requirements.

We shall build a quality culture embraced by our employees and business partners, where we are accountable for the quality

of our work.

We shall continually sustain and enhance our quality management system to

improve the quality of our products and services, maintain appropriate controls

and conduct periodic reviews of set goals.



WORLD-CLASS WORKFORCE

The 2017 Employee Engagement Survey called our attention to two focus areas — empowerment and collaboration. The results were shared with our employees and specific action plans were developed through various brownbag sessions and workshops.

To better align our culture and mindset towards the Group’s

overall goals, we reviewed and improved our talent management framework, compensation plans and Performance Scorecards. We continued to pursue initiatives to promote learning aimed at deepening our employees’ competencies and broadening their skillsets.

As we forge ahead in our quest to strengthen our core businesses and pursue growth opportunities, people and

Note: These statistics are calculated based on the Group’s headcount of 21,418.

culture remain a top priority in our strategy. During the year, we also initiated a Technical Career Pathway review and Strategic Workforce Planning for our employees. Our commercial viability and ability to remain competitive goes beyond attracting and retaining talent. We strive to build a strong sense of purpose and belonging across our global operations while at the same time strengthen our people’s capacities and capabilities for overall growth.

EMPLOYEES BY GEOGRAPHY

SingaporeAmericasEuropeAsia Pacific (excluding Singapore)

70% 18% 8% 4%

EMPLOYEES BY SECTORS

AerospaceElectronicsLand SystemsMarineOthers

39% 29% 22% 6% 4%

EMPLOYEES BY QUALIFICATIONS

Degree or equivalentTrade CertificatesDiploma or equivalent‘O’ or ‘A’ Levels or equivalentBelow ‘O’ Levels or equivalent

38% 19%20% 19% 4%

82 ST ENGINEERING


• Implement a Global Leaders Development Programme to support our globalisation thrust.

• Review and enhance our suite of learning programmes to promote self-development and a lifelong learning culture.

WORKFORCE PROFILE FOR SINGAPORE OPERATIONS

79%Male

Employees

21%Female

5%Female

95%Male

Supervised Workers*

* Supervised workers refer to workers hired through local contractors. They are on short-term contracts, work in the Group’s facilities and are supervised by ST Engineering.

30.2HRS

AVERAGE TRAINING HOURS PER EMPLOYEE

20.1HRSFemale

33.0HRSMale

TURNOVER RATE

11.3%Female

9.1%Male

9.6%

Levelling up Digital ProficienciesIn 2018, we partnered with NUS School of Continuing & Lifelong Education (SCALE) to promote continuing education and training within ST Engineering. 160 mid-level managers and engineers tapped on the NUS “All-You-Can-Learn” (AYCL) programme to bolster their digital skills in data analytics. Besides modules such as “Data Analytics Begins With Me” and “Data Analytics & Visualisation”, the AYCL programme offers Cybersecurity, Internet of Things, Artificial Intelligence, Science, Engineering, Computingand Business courses. In this partnership, the Group is also exploring the feasibility of developing a Corporate Training Academy to offer joint programmes in and outside of Singapore.

Separately, more than 360 engineers and technicians had the opportunity to level up their digital proficiencies through the Digital Transformation and Robotics Course facilitated by LEGO Mindstorms Education kits.

HIGHLIGHTS



SAFE & CONDUCIVE WORKPLACE

Workplace safety and health (WSH) is a core aspect of our sustainability journey and is a deep-rooted characteristic within the modus operandi of our business.

We believe that safety starts from the top. The visible and active participation of senior management at safety walkabouts sets the tone for our commitment towards fostering a positive WSH culture.

The Environment, Health and Safety (EHS) Committee governs our WSH management strategy. Members meet at least quarterly to monitor our EHS Management System performance and to review and update our EHS strategies.

This year, as part of the national SG Secure initiative, we reviewed and updated existing security and business continuity procedures to incorporate both preventive and mitigating measures to enhance our overall level of preparedness in the event of a terrorist attack.

We rolled out eight safety cardinal rules on WSH to raise awareness amongst our office and shopfloor colleagues, as we stepped up our WSH efforts in a campaign to improve our safety indicators.

We also launched an electronic workplace incident reporting system. The new system enables us to track and monitor all injuries, so that corrective and preventive measures can be taken promptly.

OUR 2018 PERFORMANCE

While 2018 saw an improvement in our Accident Frequency Rate (AFR) from 0.8 in 2017 to 0.4, we regret to report that there was one work-related fatality at our Tuas facility. The fatality happened onboard an oil tanker during a valve dismantling operation. As a result of the fatality case, our Accident Severity Rate increased from 19.3 to 151.1 in 2018.

Promoting Safety InnovationsAcross our operations, we continue to develop innovative solutions to enhance WSH. At the 2018 ST Engineering EHS Convention Award, we recognised and commended participating teams that demonstrated the spirit of continuous improvement and commitment to WSH.

Our engineers improved the way doubler plates were replaced on dredger vessels in our shipyards by doing away with the need for confined space entries and reducing crane lifting, falling objects and height hazards. The improved process also increased efficiency and productivity, by substantially reducing the manhours needed in such projects. The team’s effort was awarded Gold at the Convention.

Another Gold Award project is the “SMART” Robotic Grinding System, a system that improved the safety and health of our engineers at the fan containment case repair workshop. This project reduces the risk of musculoskeletal injuries through the replacement of labour-intensive work with a robotic arm. As an added safety feature, dust particles are absorbed at the point of contact with the grinding head, reducing the amount being released into the air.

Our engineers were also commended for their innovation in improving the ease of transporting and handling heavy equipment using a specially designed trolley with a three-dimensional axis jig in our aircraft conversion programmes. This improvement removes the need for man-lifting, mitigating potential physical injuries to staff and also reduces the number of men required for the work.

HIGHLIGHTS

EIGHT SAFETY CARDINAL RULES

Do not smoke outside designated areas. Keep clear of fire

protection systems and equipment.

Use fall prevention and protectiondevices when

working at heights.

Enter confined spaces only if trained and

authorised. Comply with confined space

entry and emergency procedures.

Dispose and discard waste materials in accordance with

requirements.

Operate vehicles only if trained

and authorised. Comply with

safety operation requirements.

Operate equipment only if trained and authorised.

Comply with safety operation requirements.

“Lockout Tagout” before performing any

maintenance task.

Carry out lifting operations only if trained and

authorised. Comply with safe lifting plan.

Use approved appliances and

equipment with safety mark. Do not overload

electrical circuits.

84 ST ENGINEERING


OCCUPATIONAL HEALTH PERFORMANCE INDICATORS

• Continue to improve our safety performance.

• Identify initiatives to improve mental well-being of our employees as part of total workplace safety and health.

ST Engineering

National average

ACCIDENT FREQUENCY RATE

2.0

1.5

1.0

0.5

0.02016 2017 2018

Number of accidents per million manhours worked

1.6

1.5 1.5

0.8 0.8

0.4

ACCIDENT SEVERITY RATE

200.0

150.0

100.0

50.0

0.02016 2017 2018

Number of man-days lost per million manhours worked

168.5

86

60 61

19.3

151.1

108Number of occupational health activities organised.

100%Percentage of at-risk staff who attended the Audiometric Examination.

100%Percentage of at-risk staff who attended the Respiratory Protection Training.

0Number of Occupational Disease cases (excluding Noise Induced Deafness cases).

0*Number of Advanced Noise Induced Deafness cases.

* Errata: The number of Advanced Noise Induced Deafness cases the Group witnessed in FY2018 is zero, not “one” as indicated in the printed FY2018 Annual Report.



PROTECTING OUR ENVIRONMENT

Critical to the sustainability of our business is the ability to successfully forge a symbiotic relationship with the environment. To do so, we have been actively working on a set of robust targets to reduce our environmental footprint, whilst making certain that these targets are stepped up where possible.

In 2018, we revised our GHG emission intensity reduction target to 36% on a business-as-usual basis by 2030 with 2010 as the base year. Our new target is aligned with Singapore’s Intended Nationally Determined Contribution (INDC) commitment.

As part of our long-term commitment towards renewable energy solutions, we continue to seek opportunities in solar energy, replacing lights and ageing air compressors with energy efficient alternatives.

We also initiated a study to evaluate energy saving potential in our data centres. This is achieved by measuring temperature patterns and deriving optimum operational indicators. Additionally, we identified ways to improve overall energy consumption involved in the use of air-cooling carts.

In the area of water consumption, we achieved our goal of water intensity improvement of 1.5% from 2017 by replacing existing taps with water efficient alternatives, and constant monitoring of water consumption patterns for early detection of leakages.

We ensure that our GHG inventory is audited by an external accredited agency in accordance with the standards specified in ISO 14064-1:2006.

Going Green with Solar: One Rooftop at a TimeThe sun delivers more energy to Earth in an hour than we consume in the course of a year. Sufficient sunlight hits the Earth to power an economy and businesses indefinitely. This free source of energy is available to us and at ST Engineering, we have taken prudent steps to pave our way towards clean energy.

Since 2014, we have harnessed solar energy to reduce our dependence on fuels and help us reduce our carbon footprint.

We now have solar energy systems installed on 17 roofs across our facilities at Jalan Boon Lay, Changi and Seletar in Singapore. These systems, when fully operational, are forecasted to account for 9.2% of our annual electricity consumption and consequently reducing our GHG emissions by 4,400 tonnes of Carbon Dioxide Equivalent (tCO2e).

HIGHLIGHTS

86 ST ENGINEERING

* GHG intensity figures are computed based on Scope 1 & 2 emissions normalised using revenue from Asia, where Singapore is a significant contributor.

Notes:Energy consumption and GHG emissions figures for 2017 were adjusted as a result of audits and restated accordingly.

Scope 1: Direct GHG emissions from sources owned or controlled by Singapore entities.

Scope 2: Indirect GHG emissions from the generation of purchased electricity consumed by Singapore entities.

Scope 3: Indirect GHG emissions from business travels by air carried out by Singapore entities.

• Explore opportunities to improve waste management.

• Expand solar panel installations

to other facilities.

WATER CONSUMPTION AND INTENSITY

’ooom3 ’ooom3 /$m

0.18 0.17 0.16

708 671 660

DirectIndirectIntensity

ENERGY CONSUMPTION AND INTENSITY

1.20

1.00

0.80

0.60

0.40

0.20

0.02016 2017 2018

GHG EMISSION AND INTENSITY*

150 25.0

120 20.0

90 15.0

60 10.0

30 5.0

0 02016

(Audited)2017

(Audited)2018

(Unaudited)

200

150

100

50

0

GJ/’000 m GJ/$m194

170146

Scope 1Scope 2Scope 3Intensity

Water consumptionIntensity

tCO2e/’000 tCO2e/$m

19.216.7 15.8

0.30

26.2 20.3 21.7

45.111.0

47.8

8.6

49.6

8.4

0.46

0.24

0.46

0.20

0.42

1000 0.20

750 0.15

500 0.10

250 0.05

0 02016 2017 2018



RESPONSIBLE SOURCING

Every year, we continuously improve the way we design, deliver and produce. We are increasingly compelled to source responsibly and create mutual benefits with credible vendors. As a result, we strengthened our commitment to responsible sourcing by formalising our responsible sourcing programme.

Principles and StandardsIn 2018, we took a major step forward and set the tone and standards for our procurement practices. We formulated and rolled out our Global Procurement Policy. We also developed the Vendor Code of Conduct,


setting out the basic behaviours and practices that we require from our vendors. Having these standards in place helps us chart a better path forward in our ongoing development of a responsible supply chain.

Strategic Vendor Relationship ManagementEnhancing our Strategic Vendor Relationship Programme helped us manage strategic vendors better. By segmenting our vendors, we were able to better determine their sustainability profiles and identify strategic vendors. This not only allows us to have a balanced consideration of ESG factors in our procurement process but also boosts the resilience of our supply chain.


• Formalise the Strategic Vendor Relationship Management process.

• Roll out the Vendor Code of Conduct.

SingaporeAmericasEuropeAsia (excluding Singapore) Africa & Middle East

57% 17% 15% 10% 1%

DISTRIBUTION OF PURCHASES BY GEOGRAPHICAL LOCATIONS

40% 31% 20% 9%

DISTRIBUTION OF PURCHASES BY BUSINESS SECTORS

AerospaceElectronicsLand SystemsMarine

Total Purchase Value

$3.23b

88 ST ENGINEERING

• Review community outreach focus themes.

• Formalise framework to promote staff volunteerism.

RESPONSIBLE CORPORATE CITIZENSHIP

A strong believer in giving back to the communities that we operate in, we focus on making our communities more resilient and inclusive by engaging and investing our time and resources in them. For the 19th consecutive year, we supported the President’s Challenge, contributing a total of $258,000 in 2018. In total, we have contributed more than $7.5m to this cause.

To increase our participation rate and contributions to SHARE, Community Chest’s monthly giving programme, we introduced an online sign-up process and extended our outreach to our employees through roadshows and emails to encourage sustained giving. We received a total of 19 awards at the Community Chest Awards this year, in recognition of our high participation rate and significant contribution to the SHARE programme.

Community GrantsThe NTUC Education and Training Fund uplifts working Singaporeans through training and education by providing subsidies for skills upgrading and re-skilling. With a commitment of $1m over four years beginning in 2018, we support programmes and initiatives that are aligned to our focus area of enriching lives through education.

We have also committed to donating $1m over five years beginning in 2018 towards the

cause of Project Silver Screen, a nation-wide initiative by Singapore’s Ministry of Health and Temasek Foundation Cares, to bring functional screening to seniors aged 60 and above. The functional screening includes checks on seniors’ vision, hearing and oral health, and subsidies for functional aids such as hearing aids, spectacles and dentures. With this commitment, we champion for better affordability and accessibility of healthcare, and help the elderly to take good care of their health for an improved quality of life.

Community EngagementWe reaffirmed our commitment to engage and support our community this year through TOUCH Community Services’ Meals-on-Wheels programme, where 330 of our colleagues dedicated over 1,200 manhours to deliver 1,500 food packages in Ang Mo Kio, Bukit Batok, Jurong and Toa Payoh areas across Singapore during the ST Engineering Volunteer Week.

OUR CONTRIBUTION*

CashTimeManagement costsIn-Kind

86% 10% 3% 1%

EducationEconomic developmentSocial causesEnvironmentHealthOthers

ISSUES ADDRESSED*

33% 24% 19% 13% 8% 3%

Community Contributions

$2.67m

* LBG framework was applied to measure community contributions and issues addressed.



500

400

300

200

100

02016 2017 2018


GLOBAL OPERATIONS: THE U.S.

In 2018, we continued working towards achieving our environmental target of 15% reduction in GHG intensity. We implemented LED lightings to reduce energy consumption and invested in electric vehicles for daily travel between facilities to reduce GHG emissions and energy consumption.

We enhanced the compliance training programme. All employees underwent the mandatory training on the Group’s Global Code of Conduct and Ethics. In addition, key personnel completed training on Anti-Bribery and Corruption.

Our people and companies have contributed significantly to their communities through both personal time commitment and cash donations. Examples include: VT MAE assisting in a week-long series of events, contributing more than $85,000 to benefit St. Jude’s Children’s Hospital; VT Miltope participated in a Breast Cancer Walk to raise money for Breast Cancer Research, contributions to local high schools, Big Brothers Big Sisters, and animal shelters.


Note:* GHG intensity figures are computed based on Scope 1 & 2 emissions normalised

using revenue from U.S. operations.

Scope 1 : Direct GHG emissions from sources owned or controlled by U.S. entities.Scope 2: Indirect GHG emissions from generation of purchased electricity consumed

by U.S. entities.Scope 3: Indirect GHG emissions from business travels by air carried out by

U.S. entities. However, this has been excluded due to its insignificant contribution to overall emission.

DirectIndirectIntensity

ENERGY CONSUMPTION AND INTENSITY

GJ/’000 GJ/US$m

364376

425

185 175

225

179

189

196

400

300

200

100

0

Scope 1Scope 2Intensity11.0

24.7

19.9

11.2

28.8

31.5

GHG EMISSION AND INTENSITY*

100 50

80 40

60 30

40 20

20 10

0 02016 2017 2018

tCO2e tCO2e/US$m

45.6

40.5 41.2

90 ST ENGINEERING

WORKFORCE PROFILE

Employees

16%Female

84%Male

11%Female

89%Male

Supervised Workers*

* Supervised workers refer to workers hired through local contractors. They are on short-term contracts, work in the Group’s facilities and are supervised by VT Systems.

Training Hours per Employee

AVERAGE TRAINING HOURS PER EMPLOYEE

17.7HRSFemale

29.5HRSMale27.5HRS


• Extend health and safety reporting regime to U.S. operations.

* Others include arts & culture, environment and emergency relief.

82% 9% 8% 1%

64% 16% 10% 9% 1%

HealthOthers*EducationSocial causes Economic development

OUR CONTRIBUTIONS

ISSUES ADDRESSED

CashTimeManagement costsIn-Kind

US$0.2mCommunity Contributions

TURNOVER RATE FOR EMPLOYEES

22.2%Female

25.6%Male25.1%

Turnover Rate

• Continue with initiatives to raise awareness of the Group’s sustainability agenda.


ST Engineering takes pride in being a responsible corporate citizen dedicated to supporting and engaging the communities we operate in. We actively promote a sustainable giving culture within the Group by taking on corporate giving initiatives, and empowering our employees from the ground up in volunteerism. We are committed to contributing in a holistic way to focus on enriching lives through education and touching lives through engineering.

COMMUNITY OUTREACH

2018 HIGHLIGHTS

Over

6,300 manhours contributed by more than

3,100colleagues who dedicated their time, resources and expertise to give back to the community

Benefited over

140 social service organisations and charities in the areas of children & family services, eldercare, disabilities through the Group’s corporate giving initiatives and employee-led volunteering activities.

1,300hours volunteered by our colleagues for the annual ST Engineering Volunteer Week

• Partnered key organisations like National Council of Social Services, Community Chest and supported large-scale movements including President’s Challenge on a long-term basis.

• Championed community outreach activities for the less fortunate in various ways, from packing and delivering “Fu Dai” (festive packs); preparing heartwarming meals with Willing Hearts’ Soup Kitchen; and organising regular Blood Donation Drives to donating warm clothings and blankets, toys and gifts to the needy.

• Empowered youths from Metta School, Assumption Pathway School in Singapore; BC Rain High School in Alabama, U.S., in line with our focus on enriching lives through education.

• Brought smiles and laughter to the beneficiaries at Thye Hua Kwan, Jia Ying Community Services, Christalite Methodist Home, Orange Valley Nursing Home, and SWAMI Home through food deliveries and interactive activities.

• Donated generously to support worthy social causes such as Assumption Pathway School’s development programmes and Project Silver Screen, a functional screening programme for the elderly.

92 ST ENGINEERING

135

96

10

24

78

1. All ready to deliver heartwarming and nutritious food packages to home-bound elderly across Singapore in support of the TOUCH Community Services’ Meals-on-Wheels programme.

2. Packing “Fu Dai” filled with grocery items for distribution to the needy for a fulfilling Chinese New Year.

3. U.S. colleagues bringing warmth to The Friendship House, a local homeless shelter, through a donation of blankets, hats, scarves, coats, gloves and warm clothing.

4. Environmental patrol and clean-up along the waterways of Kallang to Marina Bay area in Singapore.

5. Packing food packages for timely delivery to the doorsteps of home-bound elderly.

6. Making use of our technical expertise to repair and maintain tables and benches in the Christalist Methodist Home.

7. Serving meals to the residents at Thye Hua Kwan Moral Welfare Home .

8. U.S. colleagues working on various cleaning needs at the Embry Rucker Homeless Shelter and Herndon Neighbourhood Resource Centre.

9. Students from Assumption Pathway School putting their skills to good use during their Industrial Attachment Programme.

10. Coaching students from Metta School on job interview skills.


1PARTNERED KEY ORGANISATIONS

CHAMPIONED COMMUNITY OUTREACH ACTIVITIESBROUGHT SMILE AND LAUGHTER

EMPOWERED YOUTHS

CORPORATEGOVERNANCE

Good corporate governance is the foundation for long-term value creation of the Group. This Report sets out ST Engineering’s corporate governance processes, practices and activities in 2018 with specific reference to the guidelines of the Singapore Code of Corporate Governance 2012 (the Code).

The Board is pleased to report that the Company has complied in all material aspects with the principles, guidelines and recommendations set out in the Code. Our Summary of Disclosures is enclosed on pages 115 to 124 of this Annual Report.

BOARD MATTERS

Board’s Conduct of its Affairs(Principle 1)

The Board is accountable to shareholders for overseeing the effective management of the Company. To this end, the Board relies on the integrity, commitment, skills and due diligence of its management, its external advisors and auditors. In addition to its statutory responsibilities, the Board reserves the following key matters for its decision:

• setting the Group’s strategic objectives and ensuring that decisions made are consistent with these objectives;

• approval of annual budgets, major funding proposals, investment and divestment proposals in accordance with

the approved delegation of authority framework;

• appointment of the President & Chief Executive Officer (CEO), Board succession and appointments on Board committees;

• appointment of key management personnel and succession planning as an ongoing process;

• review of the risk management framework and sustainability performance through its Risk and Sustainability Committee (RSC). Our Risk and Sustainability Highlights are set out in page 76; and

• approval of the unaudited quarterly, half-yearly and full- year audited results prior to their release.

In the discharge of its functions, the Board is supported by six Board committees to which it delegates specific areas of responsibilities for review and decision making.

The President & CEO, Vincent Chong, is accountable to the Board. He is supported by the Management Committee, which consists of the Chief Financial Officer (CFO), the Chief Corporate Officer (CCO) and the Presidents of the four business sectors.

On onboarding a Board member, a formal letter is sent to a director upon his

appointment setting out his statutory obligations and duties and responsibilities as a director. He is also given the terms of reference for the respective Board committees. An induction programme is organised for a new director on the strategic direction and performance of the Group as well as his duties and obligations under the statutory compliance and corporate governance framework.

Facility visits are also arranged for new directors to enable them to develop a good understanding of the Group’s business, operations and the respective key managements. The Board is routinely updated on the relevant laws, SGX continuing listing obligations and accounting standards requiring compliance, and their implications for the Group, so as to enable each director to properly discharge his duties as a Board member and Board committee member.

Depending on their skillsets and background, directors are sponsored for relevant courses, conferences and seminars to better equip them to fulfil their governance role and to comply with directors’ obligations. Where there are statutory and regulatory changes that affect the obligations of directors, the Company will update the Board and, where the changes are substantive, organise briefings by external legal counsel.

94 ST ENGINEERING

Board members receive monthly consolidated management reports on the financial performance of each business sector, capital commitments and significant operational highlights to keep the Board apprised of business investments and performance updates.

The Board convenes scheduled meetings on a quarterly basis to coincide with the

Current Board of Directors BoardAudit Committee

(AC)

Executive Resource and Compensation

Committee(ERCC)

Nominating Committee

(NC)Held* Attended Held*11 Attended 11 Held* Attended Held* Attended

Name of DirectorKwa Chong Seng 5 5 4 4 1 1

Vincent Chong Sy Feng 5 5

Quek See Tiat 5 5 5 5

LG Ong Su Kiat Melvyn1 3 2

Quek Gim Pew 5 4

Khoo Boon Hui 5 5 5 5

Dr Beh Swan Gin 5 4

Lim Sim Seng 5 5 4 4 1 1

Lim Ah Doo 5 5 5 3

Lim Chin Hu2 2 2

Song Su-Min3 1 1

COL Xu Youfeng4 3 2

Retired Directors

Name of DirectorLG Lim Cheng Yeow Perry5 1 1

Neo Kian Hong6 3 2

Dr Stanley Lai Tze Chang7 5 2 5 2 4 2 1 0

Olivia Lum Ooi Lin8 1 0

RADM Alan Goh Kim Hua9 1 1

announcement of the Group’s quarterly results. Special Board meetings may be convened as and when necessary to consider corporate actions requiring the Board’s guidance or approval.

To facilitate the Board’s decision-making process, the Company’s Constitution provides for directors to participate in Board meetings

by teleconference or video conference. Decisions of the Board and Board committees may also be obtained via circulation. At the end of every Board meeting, the Chairman allocates time for its non-executive directors to meet without the presence of management. Directors’ attendance at Board and Board committee meetings is tabulated below.


Current Board of Directors

Strategy & Finance Committee

(SFC)

Research, Development and

Technology Committee(RD&T)

Risk and Sustainability Committee

(RSC)Held* Attended Held* Attended Held* 11 Attended 11

Name of DirectorKwa Chong Seng 4 4

Vincent Chong Sy Feng 4 4 4 4 5 5

Quek See TiatLG Ong Su Kiat Melvyn1 2 1

Quek Gim Pew 4 4

Khoo Boon Hui 5 5

Dr Beh Swan Gin 2 2

Lim Sim Seng 2 2

Lim Ah Doo 3 3

Lim Chin Hu2 1 1

Song Su-Min3

COL Xu Youfeng4

Non Board MembersQuek Poh Huat10 2 2

Bill Chua Teck Huat 5 5

Christopher Lau Loke Sam 5 5

Retired Directors

Name of DirectorLG Lim Cheng Yeow Perry5 2 0

Neo Kian Hong6 1 0

Dr Stanley Lai Tze Chang7 4 1 3 0

Olivia Lum Ooi Lin8 2 0

RADM Alan Goh Kim Hua9

* Reflects the number of meetings held during the time the director held office1 Appointed Director and member of RSC on 8 June 20182 Appointed Director and member of RD&T on 16 July 2018 and member of ERCC and NC on 1 December 20183 Appointed Director on 16 September 2018 and member of AC and RSC on 31 December 20184 Appointed as Alternate Director to LG Melvyn Ong on 8 June 20185 Resigned as Director on 1 May 20186 Resigned as Director on 1 August 20187 Appointed member of RSC on 20 April 2018 and resigned as Director on 31 December 20188 Retired as Director at AGM on 20 April 20189 Ceased as Alternate Director to LG Perry Lim on 1 May 201810 Ceased as Co-opted SFC member on 15 August 201811 Includes the joint AC and RSC meeting held on 21 February 2018

CORPORATEGOVERNANCE

96 ST ENGINEERING

Board Composition and Guidance(Principle 2)

The Board comprises 11 Directors and an Alternate Director. COL Xu Youfeng is Alternate Director to LG Melvyn Ong. LG Ong, in his position as Chief of Defence Force, may be called away on duty at times and may not be able to attend all Board meetings. COL Xu is fully apprised of all Board matters, receives notices to attend Board meetings and Board papers as well as Board resolutions by circulation. As Alternate Director, he is in a position to act on behalf of LG Ong in the latter’s absence.

The Board, through the Nominating Committee (NC), reviews the size and composition of the Board taking into consideration the skillsets, background and independence of directors. The Board also recognises that diversity is not limited merely to gender or any personal attributes and believes that having experienced directors with an independent mindset is important for the Board to be effective. The current board is sized to take into account the global scale of the Group’s businesses and ST Engineering’s key role in supporting Singapore’s defence technology eco-system. The Board will continue to review its composition and size to facilitate effective decision-making.

During the year, the Board welcomed the following new Directors:

• LG Ong Su Kiat Melvyn was appointed as a non-independent non-executive Director and member of the RSC on 8 June 2018. He is the Chief of Defence Force in the Ministry of Defence, Singapore.

• Lim Chin Hu was appointed as an independent non-executive Director and member of the Research, Development and Technology Committee (RDTC) on 16 July 2018. He was also appointed as a member of the NC and the Executive Resource and Compensation Committee (ERCC) on 1 December 2018.

• Song Su-Min was appointed as an independent non-executive Director on 16 September 2018 and became a member of the Audit Committee (AC) and RSC on 31 December 2018. She is a Partner at Allen & Gledhill LLP.

During the year, Olivia Lum retired at the 21st AGM on 20 April 2018. The Board bade farewell to LG Perry Lim and Neo Kian Hong who stepped down on 1 May 2018 and 1 August 2018 respectively. The Board also bade farewell to Dr Stanley Lai who stepped down on 31 December 2018 after having served 9 years as independent Director on the Board.

The Board consists of members with established track record in defence, business, finance, banking, technology, legal and management. Each non-executive director brings to

the Board an independent perspective based on his/her training and professional expertise to enable the Board to make balanced and well considered decisions.

The Board has eight independent Directors who represent more than 70% of the Board. The Code requires the independent directors to comprise at least half of the Board. The independence of each director is determined upon appointment and reviewed annually by the NC.

The NC has affirmed that the independent Directors are Kwa Chong Seng, Khoo Boon Hui, Quek See Tiat, Dr Beh Swan Gin, Lim Sim Seng, Lim Ah Doo, Lim Chin Hu and Song Su-Min. Although Dr Stanley Lai had stepped down on 31 December 2018, for the full FY2018 reporting period, he was considered independent by the NC. The Board agrees with the NC’s assessment.

In keeping with the momentum of our board succession plan, Mr Khoo Boon Hui, who was appointed as independent non-executive director on 1 September 2010, has indicated that he will step down from the Board on 17 April 2019.

The Board has, at all times, exercised independent judgment to make decisions, using its collective wisdom and experience to act in the best interests of the Company. Any director who has an interest that may conflict with a subject under discussion by the Board,


declares his/her interest and either recuses himself/herself from the information and discussion of the subject matter or abstains from decision-making.

The Board held a total of five meetings during the year to consider, among other things, the approval and release of the FY2017, 1Q2018, 2Q2018 and 3Q2018 results.

The Board and the Strategy & Finance Committee (SFC) reviewed the Group’s growth and strategy plans to ensure that the work of the Group is aligned with its charter and corporate objectives taking into account the opportunities and challenges in the environment in which we operate.

Chairman and Chief Executive Officer(Principle 3)

The Chairman’s and President & CEO’s roles and responsibilities are kept separate in order to maintain effective oversight. The recommendation in the Code for a lead independent director is not applicable as the Chairman and the President & CEO are separate individuals and are not related. No individual or small group of individuals dominates the Board’s decision making process. The President & CEO and senior management regularly consult with individual Board members and seek the advice of members of the Board committees through meetings, telephone calls as well as by email.

Kwa Chong Seng joined the Board on 1 September 2012. He was appointed Chairman on 25 April 2013. Mr Kwa is the retired Chairman and Managing Director of ExxonMobil Asia Pacific Pte Ltd. Other than serving as a non-executive Director on the Board of SeaTown Holdings Pte Ltd, a wholly-owned subsidiary of Temasek Holdings (Private) Limited, he does not hold any other position in Temasek Holdings. The NC has determined that he is an independent Director.

The Chairman is responsible for leading the Board and ensuring the effective functioning of the Board to act in the best interests of the Company and its shareholders. The Chairman facilitates the relationship between the Board, President & CEO and management, engaging them in open dialogue over various matters, including strategic issues, sustainability, risks and business planning processes. He ensures that discussions at the Board level are conducted objectively and professionally where all views are heard and key issues are debated in a fair and open manner. The Chairman also ensures that adequate time is provided for discussion of strategic issues and key concerns at Board meetings. He represents the views of the Board to the shareholders.

Vincent Chong who is an executive Director, and the President & CEO, is accountable to the Board for the conduct and performance of the Group.

He has been delegated authority to make decisions within certain financial limits authorised by the Board. He is supported in his work by the Management Committee.

Board Membership & Evaluation of Performance(Principles 4 and 5)

Supporting the Board are the following Board committees:

• Audit Committee

• Executive Resource and Compensation Committee

• Nominating Committee

• Strategy & Finance Committee

• Research, Development and Technology Committee

• Risk and Sustainability Committee

NOMINATING COMMITTEE

The NC is responsible for reviewing the composition of the Board and identifying suitable candidates to the Board, in particular, candidates with the appropriate qualifications, skillsets and experience who are able to discharge their responsibilities as directors. Shortlisted candidates are recommended to the Board for approval. The NC is also responsible for reviewing and determining the independence of non-executive directors annually, conducting board performance evaluation, succession planning for President & CEO and director training and development.

CORPORATEGOVERNANCE

98 ST ENGINEERING

The NC comprises three non-executive independent Directors. Kwa Chong Seng is the Chairman of the NC. He abstains from voting when it comes to a determination of his independence. The other members are Dr Stanley Lai (until 31 December 2018), Lim Sim Seng and Lim Chin Hu.

The NC held one meeting in 2018 while other decisions were obtained by circulation. The NC is continually engaged in the board renewal process of ST Engineering, having regard to the skills, experience and industry expertise needed for a balanced board composition to, among other things, oversee governance and risks within the Group’s business. When the need for a new director is identified, potential candidates are identified from various sources. The NC will assess a shortlist according to the type of expertise needed. The NC will also assess a candidate’s character, independence and experience to ensure that he/she has the requisite standard of competence to carry out his/her duties as a director of a listed company.

During the year, the NC reviewed and affirmed the independence of the Company’s independent Directors.

The NC conducted a collective assessment of the Board to gauge the effectiveness of the Board’s performance, the adequacy of the blend of skillsets and experience of the Board, and the quality and timeliness of board and

committee meeting agendas and papers submitted by the management. The review was internally undertaken with each director being asked to complete a questionnaire. Their feedback was collated and shared with the Board. The review indicated that the Board continues to function effectively. The NC also took on board the feedback of the Board members on areas for improvement.

The NC also noted the list of other directorships held by our Directors taking into consideration their principal commitments. The NC is satisfied that each of the Directors is able to devote time to carry out his/her duties as director in the Company.

The Board has considered and agreed not to set guidelines for a maximum directorship that a director can hold. Annually, an incumbent director is asked to affirm that he/she has adequate time to devote to his/her Board responsibilities. ST Engineering Board members are selected on the basis of their ability to contribute to the Board through their relevant skillsets, experience, calibre and willingness to devote time. In addition, each director is required to provide an annual affirmation of commitment to his/her Board responsibilities. With these considerations, the Board is of the view that setting a maximum number of board representations for our Directors is not needed.

The NC is also responsible for renewal and succession plans

to ensure Board continuity. At each Annual General Meeting (AGM), one-third of the directors with those longest in office since his/her last re-election have to retire. Effectively, this results in all directors having to retire at least once every three years or even earlier, in compliance with SGX Listing Rule 720(5). A retiring director may submit himself/herself for re-election. Under this provision, Vincent Chong, Lim Sim Seng and Lim Ah Doo will retire at the 2019 AGM. LG Melvyn Ong, Lim Chin Hu and Song Su-Min, who are newly appointed, will hold office until the forthcoming AGM of the Company. The retiring Directors, being eligible, have offered themselves for re-election. In accordance with SGX Listing Rule 720(6), the information relating to the retiring Directors seeking re-election is found at pages 20 to 27.

With the exception of Vincent Chong, each of the retiring non-executive Directors has confirmed that he/she does not have any relationship with his/her fellow Directors nor with the Company and its substantial shareholders.

The Board, acting on the recommendation of the NC, proposes that each of the retiring Directors, be re-elected at the Company’s forthcoming AGM.

Save as disclosed for Vincent Chong, the remaining 10 Directors are non-executive Directors.


The composition of the Board and Board committees as at 31 December 2018 is tabulated below:

Audit Committee

(AC)(established on

15/1/1998)

Strategy & Finance

Committee (SFC)

(revamped from Budget and Finance

Committee on 11/5/2017)

Executive Resource and Compensation

Committee (ERCC)

(established on 6/12/1997)

Nominating Committee

(NC)(established on

4/12/2002)

Research, Development

and Technology Committee

(RD&T)(established on

1/8/2003)


(RSC)(established on

7/12/1998)

BOARD MEMBERS

Kwa Chong Seng C C C

Vincent Chong Sy Feng M M M

Quek See Tiat C

LG Ong Su Kiat Melvyn1 M

Quek Gim Pew C

Khoo Boon Hui M C

Dr Beh Swan Gin M

Lim Sim Seng M M M

Lim Ah Doo M M

Lim Chin Hu2 M M M

Song Su-Min3 M M

COL Xu Youfeng4

NON BOARD MEMBERS

Bill Chua Teck Huat CMChristopher Lau Loke Sam CM

Denotes: C – Chairman M – MemberCM – Co-opted Member

1 Appointed Director and member of RSC on 8 June 20182 Appointed Director and member of RD&T on 16 July 2018 and member of ERCC and NC on 1 December 20183 Appointed Director on 16 September 2018 and member of AC and RSC on 31 December 20184 Appointed as Alternate Director to LG Melvyn Ong on 8 June 2018

CORPORATEGOVERNANCE

100 ST ENGINEERING

Access to Information(Principle 6)

The management furnishes Board members with monthly management reports, providing updates on key operational activities and financial analysis. The Board also has unrestricted access to the President & CEO, the CFO, CCO, management and the Company Secretary as well as the internal and external auditors and the risk management team. The Board may also seek independent professional advice, if necessary, at the Company’s expense.

Board papers are sent to directors at least three days prior to meetings in order for directors to be adequately prepared for the meetings.

The Company Secretary attends all Board, AC and NC meetings and ensures that board procedures are followed. The Company Secretary facilitates communication between the Board, its committees and management and advises the Board on governance matters including their timely disclosure obligations. She also assists with the induction of new directors as well as the co-ordination of continuing training for board members to keep the Board up-to-date on corporate governance matters. The appointment and removal

The ERCC performs the following duties and responsibilities:

Executive Remuneration General Framework

• Reviews and recommends to the Board the Group’s general framework for determining executive remuneration including the remuneration of the President & CEO, top five key management executives of the Group and other senior management executives (collectively referred to as “Senior Management Executives”).

Executive Director and Senior Management Executives

• Reviews and recommends to the Board the entire specific remuneration package and service contract terms for the President & CEO, who is also the executive Director.

• Considers, reviews, approves and/or varies (if necessary) the entire specific remuneration packages and service contract terms for the Senior Management Executives of the Group. For FY2018, the Board reviewed and approved the specific remuneration packages and service contract terms for the key management executives.

of the Company Secretary is a matter for the Board as a whole to decide.

REMUNERATION MATTERS

Procedures for Developing Remuneration policies(Principle 7)Level and Mix of Remuneration(Principle 8)Disclosure on Remuneration(Principle 9)

ROLE OF EXECUTIVE RESOURCE AND COMPENSATION COMMITTEE

The ERCC performs the role of the remuneration committee. The ERCC comprises Kwa Chong Seng as Chairman, Dr Stanley Lai (until 31 December 2018), Lim Sim Seng and Lim Chin Hu. The members of the ERCC have held senior positions in large organisations and are experienced in the area of executive remuneration policies and trends. All ERCC members are non-executive independent directors.

The ERCC met four times during the year. All decisions at any meeting of the ERCC are decided by a majority of votes of the ERCC members present and voting (the decision of the ERCC shall at all times exclude the vote, approval or recommendation of any member who has a conflict of interest in the subject matter under consideration).


Non-executive Director Remuneration

• Reviews and recommends to the Board the remuneration framework (including directors’ fees) for non-executive directors.

Equity-based Plans

• Approves the design of equity-based plans and reviews and administers such plans.

Executive and Leadership Development

• Oversees the development of management with the aim of a continual build up of talent and renewal of strong and sound leadership to ensure the continued success of the Group and its businesses.

• Approves appointments to Senior Management Executive positions within the Group and reviews succession plans for key positions within the Group.

For financial year 2018, Aon Hewitt Singapore Pte Ltd (Aon) was engaged as remuneration consultant (Remuneration Consultant) to provide professional advice on board and executive remuneration matters. Aon and its principal consultant are independent and are not related to the Group or any of its directors.

EXECUTIVE REMUNERATION STRUCTURE

Remuneration for the Senior Management Executives comprises a fixed compensation, variable cash-based incentives, share-based incentives and market-related benefits.

A. Fixed Compensation:

The fixed compensation comprises the base salary and compulsory employer’s Central Provident Fund (CPF) contributions.

B. Variable Cash-based Incentives:

The variable cash-based incentives include the Performance Target Bonus (PTB) and EVA-based Incentive Scheme.

Performance Target Bonus

The PTB is a cash-based incentive for Senior Management Executives which is linked to the achievement of annual performance targets that will vary depending on their job requirements.

Individual performance objectives are set at the beginning of each financial year. The objectives are aligned to the overall strategic, financial and operational goals of the Group and Company. These objectives are cascaded down to a select group of key executives creating alignment between the performance of the Group, Company and the individual.

The individual PTB payouts for the President & CEO and key management executives are determined by the ERCC based on the Group’s, Company’s and individual performance at the end of the financial year.

EVA-based Incentive Scheme

The EVA-based Incentive Scheme (EBIS) was established with the objective of motivating and rewarding employees to create sustainable shareholder value achieved by growing profits, deploying capital efficiently and managing the risk profile and risk horizon of the business. A portion of the variable cash-based incentives of the Senior Management Executives is tied to the EVA achieved by the Group in the financial year.

Under the plan, a portion of EBIS bonus declared for the financial year will be paid out annually while the remaining portions will be deferred in an EVA bank. Amounts in the EVA bank are at risk because negative EVA will result in a clawback of EVA accumulated. This mechanism encourages the Senior Management Executives to work for sustained EVA generation and to adopt strategies that are aligned with the long-term interests of the Group.

In addition, the Group has a clawback facility with respect to the EVA bank in the event of a restatement of the financial results of the Group subsequent to an earlier misstatement, and provisions for the forfeiture of the remaining EVA bank

CORPORATEGOVERNANCE

102 ST ENGINEERING

balance on termination due to misconduct or fraud resulting in any financial loss to the Group.

Based on the ERCC’s assessment, the Group has partially met the predetermined targets in financial year 2018. The resulting annual EVA declared under EBIS was adjusted accordingly.

C. Share-based Incentives:

Shares which were granted in financial year 2018 were based on the Singapore Technologies Engineering Performance Share Plan 2010 (PSP2010) and the Singapore Technologies Engineering Restricted Share Plan 2010 (RSP2010) approved and adopted by shareholders of the Company at the Extraordinary General Meeting held on 21 April 2010. Yearly share grants under the PSP2010 and RSP2010 do not exceed the internal annual limit of 1% of the total number of issued shares of the Company, set by the ERCC.

Details of the share plans and grants are given in the Share Plans section of the Directors’ Statement from pages 126 to 134.

PSP2010

The PSP2010 was established with the objective of motivating Senior Management Executives to strive for sustained growth and performance of the Group.

Pursuant to the PSP2010, the ERCC has decided to

grant shares on an annual basis, conditional on meeting targets set for a three-year performance period. With effect from financial year 2018, the performance measures used in PSP grants under PSP2010 are:

• Absolute Total Shareholder Return (TSR) against Cost of Equity hurdles (i.e. measure of absolute Wealth Added); and

• Earnings Per Share (EPS) Growth against pre-determined EPS Growth targets over the performance period.

A minimum threshold performance is required for any performance shares to be released to the recipients at the end of the performance period. The actual number of performance shares released will depend on the achievement of predetermined targets over the performance period, capped at 170% of the shares granted.

The release of the final PSP shares is conditional on satisfactory individual performance of the recipient at the end of the performance period.

The Group has clawback policies for the unvested shares under PSP2010 in the event of exceptional circumstances of restatement of the financial results of the Group subsequent to an earlier misstatement, or of misconduct or fraud resulting in any financial loss to the Group.

The Group has exceeded the predetermined target performance level for PSP awards granted based on the performance period from financial years 2016 to 2018.

RSP2010

The RSP2010 was established with the objective of retaining and motivating managers and above to strive for sustained long term growth of the Group. It also aims to foster a share ownership culture among employees within the Group and to better align employees’ incentives with shareholders’ interests.

Pursuant to the RSP2010, the ERCC has decided to grant shares on an annual basis subjected to individual performance. With effect from 2018, the RSP share grants under RSP2010 will be time-based and released equally over four consecutive years.

The Group has clawback policies for the unvested shares under RSP2010 in the event of exceptional circumstances of restatement of the financial results of the Group subsequent to an earlier misstatement, or of misconduct or fraud resulting in any financial loss to the Group.

D. Market-related Benefits:

The benefits provided are comparable with local market practices.


CORPORATEGOVERNANCE

The Code requires a company to disclose the names and remuneration of the CEO and at least the top five key management personnel (who are not also directors or the CEO). Details of the remuneration package for the President & CEO are provided in the Summary Remuneration Table for directors on pages 106 to 107. Details of the remuneration packages for the Key Management Executives are provided in the Summary Remuneration Table for Key Management Executives on page 108.

In performing the duties as required under its Terms of Reference, the ERCC ensures that remuneration paid to the Senior Management Executives are strongly linked to the achievement of business and individual performance targets. The performance targets as determined by the ERCC are set at realistic yet stretched levels each year to motivate a high degree of business performance with emphasis on both short and long-term quantifiable objectives. Pay-for-Performance Alignment study was conducted periodically by the Remuneration Consultant and reviewed by the ERCC for sufficient evidence indicating Pay-for-Performance alignment for the Group in terms of both absolute and relative performance.

Under the Code, the compensation system shall take into account the risk policies of the Group, be symmetric with risk outcomes and be sensitive to the time horizon of risks. The ERCC will undertake periodic reviews of the compensation-related risks.

During financial year 2018, there were no termination, retirement

and post-employment benefits granted to directors, President & CEO and Key Management Executives other than in accordance with the standard contractual agreement.

There were no employees who were immediate family members of a director or the President & CEO and whose remuneration exceeded S$50,000 during the financial year 2018, except for Quek Gim Chuah (VP Quality, Aerospace sector), who is the brother of Quek Gim Pew, Director of the Company.

NON-EXECUTIVE DIRECTOR REMUNERATION

Non-executive directors (NEDs) have remuneration packages consisting of directors’ fees and attendance fees, which are approved in arrears by shareholders for services rendered in the previous year. The Directors’ Remuneration Framework comprises a basic retainer, attendance and additional fees for serving on Board committees.

The ERCC, in consultation with Aon, conducted a review of the Directors’ Remuneration Framework in 2018. The review took into account a variety of factors, including prevailing market practices and referencing directors’ fees against comparable benchmarks, as well as the roles and responsibilities of the Board and Board committees. Following the review, a revised directors’ remuneration structure was developed in order to ensure a competitive level of director’s remuneration as the Group

strives for sustainable growth and value creation.

The recommended changes include an increase in private sector Directors’ Board Basic Retainer fee from $72,000 to $75,000 and an increase in Board/Committee meeting fees from $2,000/$1,000 to $5,000/$2,500. The Board also recommends that the all-in Active Chairman fee be increased from $600,000 to $750,000 per annum.

For services rendered in financial year 2018, eligible NEDs will receive 70% of the total directors’ fees in cash and 30% of the total directors’ fees in the form of restricted shares which are governed by the terms of RSP2010, subject to shareholders’ approval at its AGM in April 2019.

As the restricted shares are granted in lieu of directors’ remuneration in cash, the shares will be granted outright as fully paid shares with no performance conditions attached and no vesting periods imposed. To encourage the alignment of interests of the NEDs with the interests of shareholders, the share grant has a moratorium on selling. Each eligible NED is required to hold shares in the Group worth the lower of: (a) the total number of shares in the Group granted to such NED as payment of the shares’ component of the NEDs’ fees for financial year 2011 and onwards; or (b) the number of shares of equivalent value to the prevailing annual basic retainer fee for a director of the Group. An NED can sell all his/her shares in the Group a year after the end of his/her Board tenure.

104 ST ENGINEERING

The computation of NEDs’ remuneration is based on the following rates.

From Private Sector ($)2018

Chairman Fee (all-in) 750,000

Board Basic Retainer FeeDirector 75,000

Additional/Committee FeesAudit Committee:- Chairman- Member

52,00029,000

ERCC, SFC, RDTC and RSC:- Chairman- Member

35,00018,000

Other Committees (including NC):- Chairman- Member

29,00014,000

Attendance FeesPer Board Meeting 5,000

Per Board Committee Meeting 2,500

The Chairman fee is a fixed fee covering Board basic retainer, Board Committee and meeting attendance fees. The fee is paid in a combination of cash (70%) and shares (30%). The shares granted, as part of the fee, are fully-paid with no performance conditions attached and no vesting period imposed. However, the shares will have to be held for at least two years from the date of grant, and the two-year moratorium will apply even in the event of retirement.

The NEDs’ remuneration payable in respect of financial year 2018 is proposed to be $1,772,607 (FY2017: $1,547,391). Details of the directors’ remuneration are provided in the Summary Remuneration Table for Directors on pages 106 to 107.

Fees for directors who hold public sector appointments follow the Directorship & Consultancy Appointments Council (DCAC)’s guidelines as set out below.

Public Sector NED fees ($)

2018

Chairman 45,000

Deputy Chairman/Chairman Executive Committee/Chairman Audit Committee

33,750

Member Executive Committee/Member Audit Committee/Chairman of Other Board Committee(s)

22,500

Director/Other Committee Member 11,250

NEDs who hold public sector appointments will not be eligible for the shares component of the NEDs’ remuneration. 100% of their remuneration in cash is payable to DCAC, where applicable.


CORPORATEGOVERNANCE

SUMMARY REMUNERATION TABLE FOR DIRECTORS FOR THE YEAR ENDED 31 DECEMBER 2018 (GROUP):

Payable by the Company

Directors’ Total Fees*5

Executive Director Salary*1

Variable Cash-based Incentives*2 Benefits*3

Share-basedIncentives*4 Cash-based Share-based Total

$ $ $ $ $ $ $

Vincent Chong Sy Feng 973,239 1,671,313 127,750 1,830,585 – – 4,602,887


Non-Executive Directors Salary*1



$ $ $ $ $ $ $

Kwa Chong Seng – – – – 525,000 225,000 750,000

Quek See Tiat – – – – 115,150 49,350 164,500

LG Lim Cheng Yeow Perry – – – – 3,699 (a)(d) – 3,699

LG Ong Su Kiat Melvyn – – – – 6,380 (b)(d) – 6,380

Neo Kian Hong – – – – 6,534 (c)(d) – 6,534

Quek Gim Pew – – – – 22,500 (d) – 22,500

Dr Stanley Lai Tze Chang – – – – 176,080 (e) – 176,080

Khoo Boon Hui – – – – 189,000 – 189,000

Olivia Lum Ooi Lin – – – – 27,772 (f) – 27,772

Dr Beh Swan Gin – – – – 11,250 (d) – 11,250

Lim Sim Seng – – – – 117,250 50,250 167,500

Lim Ah Doo – – – – 113,400 48,600 162,000

Lim Chin Hu – – – – 40,795 (g) 17,483 58,278

Song Su-Min – – – – 18,980 (h) 8,133 27,114

COL Xu Youfeng(Alternate to LG Ong Su Kiat Melvyn) – – – – – – –

Total – – – – 1,373,790 398,816 1,772,607

106 ST ENGINEERING

Payable by Subsidiaries


Executive Director Salary*1



$ $ $ $ $ $ $

Vincent Chong Sy Feng – – – – 30,000 (i) – 30,000


Non-Executive Directors Salary*1



$ $ $ $ $ $ $

LG Ong Su Kiat Melvyn – – – – 4,844 (d) – 4,844

Quek Gim Pew – – – – 12,500 (d) – 12,500

Dr Stanley Lai Tze Chang – – – – 45,000 – 45,000

Dr Beh Swan Gin – – – – 27,944 (d) – 27,944

Lim Sim Seng – – – – 46,573 – 46,573

Lim Ah Doo – – – – 47,178 – 47,178

Lim Chin Hu – – – – 23,362 – 23,362

Total – – – – 207,401 – 207,401

*1 Salary includes base salary and employer CPF for the financial year ended 31 December 2018. *2 Variable Cash-based Incentives include Performance Target Bonus & EVA-based incentive declared for the financial year ended

31 December 2018.*3 Benefits provided for employees are comparable with local market practices. These include medical, dental, insurances, transport, etc. *4 Share-based incentives consist of PSP and RSP shares granted for financial year ended 31 December 2018.*5 The directors’ cash fees and share grants will only be paid/granted upon approval by the shareholders at the forthcoming AGM of

the Group.

(a) Pro-rated. LG Perry Lim resigned as Director on 1 May 2018(b) Pro-rated. LG Melvyn Ong was appointed Director on 8 June 2018(c) Pro-rated. Neo Kian Hong resigned as Director on 1 August 2018(d) Fees for public sector directors are payable to a government agency, the DCAC(e) Resigned as Director on 31 December 2018(f) Pro-rated. Retired at AGM on 20 April 2018(g) Pro-rated. Lim Chin Hu was appointed Director on 16 July 2018(h) Pro-rated. Song Su-Min was appointed Director on 16 September 2018(i) Fees are payable to Singapore Technologies Engineering Ltd

The following information relates to remuneration of directors of ST Engineering:

Number of Directors in Remuneration Bands2018 2017

$500,000 and above 2 2

$250,000 to $499,999 0 0

Below $250,000 13 13

Total 15 15


CORPORATEGOVERNANCE

SUMMARY REMUNERATION TABLE FOR KEY MANAGEMENT EXECUTIVES FOR THE YEAR ENDED 31 DECEMBER 2018 (GROUP):

Remuneration Salary*1


Share-basedIncentives*4 Total

% % % % %

Between $2,250,000 and $2,500,000Lim Serh Ghee 27 40 3 30 100

Ravinder Singh s/o Harchand Singh 28 39 3 30 100

Between $1,750,000 and $2,000,000Foo Chee Keng Cedric 36 32 5 27 100

Between $1,250,000 and $1,500,000Ng Sing Chan 45 27 6 22 100

Dr Lee Shiang Long 35 31 4 30 100

Total for Key Management Executives $9,245,782

*1 Salary includes base salary and employer CPF for the financial year ended 31 December 2018.*2 Variable Cash-based Incentives include Performance Target Bonus & EVA-based incentive declared for the financial year ended

31 December 2018.*3 Benefits provided for employees are comparable with local market practices. These include medical, dental, insurances,

transport, etc.*4 Share-based incentives consist of PSP and RSP shares granted for financial year ended 31 December 2018.

ACCOUNTABILITY AND AUDIT

Accountability(Principle 10)

The Board is responsible for providing a balanced assessment of the Group’s performance, position and prospects. In presenting the annual financial statements and quarterly results announcements to shareholders promptly, it is the aim of the Board to provide the shareholders with a detailed analysis, explanation and assessment of the Group’s performance, position, risk review and prospects. The Board also takes adequate steps to ensure compliance with legislative and regulatory requirements, including compliance with the continuing listing obligations under the SGX Listing Manual. As and when new rules and

regulations or accounting standards are introduced, external professionals will be invited to brief our Directors.

The appointment of auditors is subject to approval at each AGM. In making its recommendations to shareholders on the appointment and re-appointment of auditors, the Board relies on the review and recommendations of the AC. The AC’s assessment of the external auditor is based on factors such as the performance and independence of the auditor. KPMG LLP in Singapore audits Singapore incorporated subsidiaries that are not exempt from audit under the Singapore Companies Act. Subsidiaries incorporated in countries outside Singapore that require an audit in their local jurisdictions are largely audited by other independent member

firms of the KPMG network affiliated with KPMG International Cooperative, a Swiss entity. Some of our overseas associates and joint ventures engage other auditing firms, but the number of such entities is not significant.

In compliance with SGX requirements, an audit engagement partner may only be in charge of an audit for up to five consecutive years. KPMG LLP, which was first appointed in 2010 has been meeting this requirement. The current audit engagement partner took over ST Engineering’s audit in February 2017. The Company has complied with Rules 712 and 715 of the SGX Listing Manual in relation to the engagement of its auditors.

Directors and key senior executives of the Group are

108 ST ENGINEERING

prohibited from dealing in ST Engineering shares two weeks before the announcement of ST Engineering’s first quarter, second quarter, third quarter, and full year results up to the date of the announcement of the results. Directors are discouraged from trading on short term considerations. Additionally, all directors of the Group and employees are reminded not to trade in situations where the insider trading laws and rules would prohibit trading.

The directors’ interests in shares of ST Engineering and its related companies during the year are found on pages 127 to 133 of this Annual Report.

Audit Committee(Principle 12)

The AC is supported in its work by the Risk and Audit Committees (RACs) of the four business sectors. The respective chairmen of the RACs are invited to attend the AC meetings of ST Engineering so as to have a clear understanding of policies made at the holding company level and to share any feedback or raise any issue that the Sectors’ RACs may have. During the year, an exercise to streamline the four business sectors’ and subsidiaries’ Boards was carried out. In August 2018, the RACs were restructured to form the Risk and Audit Advisory Committees which will continue the work of the RACs but without oversight on financial performance.

The AC has full authority to commission and review findings

of internal investigations into matters where it is alerted of any suspected fraud or irregularity or failure of internal controls or infringement of any law likely to have a material impact on the Group’s operating results. It can investigate any matter within its terms of reference and with the full cooperation of management.

The AC’s key terms of reference include the following:

• undertaking the statutory and regulatory functions of an AC as are prescribed by law from time to time;

• reviewing the reports of the external and internal auditors to provide a further layer of assurance of the integrity, confidentiality and availability of critical information;

• reviewing interested person transactions;

• evaluating the work of the external auditors to determine their independence and recommending to the Board their reappointment and compensation on an annual basis; and

• reviewing the level of non-audit services.

The Company has in place a Whistle-Blowing framework, where staff may, in confidence and without fear of retaliation, raise concerns of incidents of possible wrongdoing or breach of applicable laws, regulations or policies to the Whistle-Blowing Committee

chaired by the AC Chairman. In accordance with this framework, a Whistle-Blowing dashboard reporting is presented to the AC at its quarterly meetings. As ST Engineering has become a global company with presence in many countries, it is aware of the need to apply international corporate governance standards wherever it operates. It takes a serious view of all reports of violations received and may commission investigations as appropriate.

The AC comprises Quek See Tiat as Chairman, Dr Stanley Lai (until 31 December 2018), Khoo Boon Hui, Lim Ah Doo and Song Su-Min. All the members of the AC are independent Directors and majority, including the AC Chairman, have the relevant accounting or financial management expertise or experience. None of the AC members were previous partners or Directors of the Company’s existing external audit firm within the previous 12 months prior to their appointment to the AC, and none of the AC members have any financial interest in the Company’s existing audit firm.

The AC held five meetings during the year including a joint meeting with the RSC to review the significant risks and related key controls. The AC met once with the external and internal auditors, without management, during the year to gather feedback on management’s level of cooperation and other matters that warrant the AC’s attention.


During the year, the AC reviewed the financial statements of the Group before the announcement of the Group’s quarterly, half-yearly and full-year results. Amongst the matters discussed, the following significant matters impact the financial statements, and were reviewed by the AC in relation to their materiality and appropriateness in approach, methodology and assessment. These matters were also discussed with management and the external auditors:

Significant matters How the AC reviewed these matters

Impairment of non-financial assets, including goodwill and other intangible assets

The AC reviewed the reasonableness of cash flow forecasts, the long-term growth rate and discount rate used in the valuation model in goodwill impairment assessment. It also reviewed the stress testing of the valuation and its sensitivity to changes in key assumptions used in the valuation model.

Revenue recognition The AC reviewed the various controls that were designed and applied by the Group in the recognition of revenue and profit from long-term contracts to ensure that the estimates used in determining the amount of revenue and costs recognised were appropriate.

Impairment of property, plant and equipment – Roll-on/Roll-off Passenger ferry (“ROPAX”)

The AC assessed the sale and charter scenarios, cash flow forecasts, long-term growth rate and discount rate that were used in the valuation model for the valuation of property, plant and equipment relating to ROPAX.

CORPORATEGOVERNANCE

The AC concluded that management’s accounting treatment and estimates were appropriate for the above significant matters. All the key audit matters (KAMs) that were raised by the external auditors for the financial year ended 31 December 2018 have been addressed by the AC and discussed in the above commentary. The KAMs in the audit report for the financial year ended 31 December 2018 can be found on pages 135 to 138 of this Annual Report.

During the year, the AC considered and approved the 2018 Audit Plan and the 2018 Internal Audit (IA) Plan. In addition, the AC reviewed the adequacy of internal control procedures including IT security issues, Interested Person

transactions and the issues raised in IA reports. It also considered the reappointment of the external auditors as well as their remuneration.

The AC also reviewed the level of non-audit services performed by its external auditors. For the full year 2018, $7.9m was paid to the external auditors for audit and non-audit services of the Group, of which $2.4m or 31% were for non-audit services. The AC was satisfied that the non-audit services performed by the auditors did not compromise their independence.

The AC is routinely updated on the proposed and impending changes in accounting standards and their implications for the Group.

Risk Management and Internal Control(Principle 11)Internal Audit(Principle 13)

The AC oversees and appraises the quality of the IA function. The Board, through the AC and RSC, is responsible for oversight of the risk management responsibilities, sustainability, internal controls and governance processes delegated to management.

IA supports the AC in reviewing the adequacy of the Group’s internal control systems.

ST Engineering IA is staffed with individuals with the relevant qualifications and experience and comprises a

110 ST ENGINEERING

team of 25 staff members, including the Head, Internal Auditor, who reports to the AC functionally and to the President & CEO administratively.

ST Engineering IA is a member of the Singapore Chapter of the Institute of Internal Auditors (IIA) and adopts the International Standards for the Professional Practice of Internal Auditing (the IIA Standards) laid down in the International Professional Practices Framework issued by the IIA. ST Engineering IA continues to meet or exceed the IIA standards in all key aspects.

IA plans its internal audit schedules in consultation with, but independently of, management. The IA Plan is submitted to the AC for approval at the beginning of each year.

The AC is satisfied that the IA is independent, effective and adequately resourced.

All IA reports are submitted to the AC for deliberation with copies of these reports extended to the relevant senior management, for prompt corrective actions, as recommended. Furthermore, IA’s summary of findings, recommendations and updates on management actions taken are discussed at the quarterly AC meetings.

During the year, a joint RSC and AC meeting was held

in accordance with the respective terms of reference of the committees to facilitate constructive sharing of the common issues that may need to be addressed by both these committees. During the joint committee meeting, members were updated on the key risks and the risk management process.

IA continues to work with management to align companies to the Group’s internal control environment and compliance standards in order to strengthen the self-regulating checks and balances. Control issues, if any, are discussed at AC meetings. IA made periodic visits to overseas subsidiaries to review their operations to ensure compliance with the internal controls framework. IA is assisted in its work by an external accounting firm which is not the external auditors of the Company to ensure independence of the internal audit role. In accordance with its plan, surprise audits were conducted in the course of the year on selected areas including treasury activities.

IA continued with its system of rating a company at the end of an internal audit for the purpose of differentiating the high risk issues which require immediate attention.


The RSC, chaired by Khoo Boon Hui, comprises

LG Melvyn Ong, Dr Stanley Lai (until 31 December 2018), Song Su-Min and Vincent Chong. Christopher Lau and Bill Chua are co-opted members of the RSC given their experience as RAC Chairmen.

a) Risk Governance

The RSC assists the Board in its risk governance responsibility. RSC’s role is one of oversight of the responsibilities delegated to management to ensure that there is a system of controls in place for identifying and managing risks in order to safeguard stakeholders’ interests and the Company’s assets. The RSC also oversees the Group’s sustainability issues and reporting.

The RSC is supported by the Risk and Sustainability Team (RST), headed by Head, Risk and Sustainability, working with the Sector Chief Risk Officers from each of the following Sectors:

1) Aerospace2) Electronics3) Land Systems4) Marine

The Head of RST reports to the Chairman of the RSC and ST Engineering’s President & CEO. The RST provides leadership in the implementation of a Group-wide Enterprise Risk Management (ERM) framework that allows risks to be identified, assessed,


monitored and managed by the business managers.

The annual risk work plan is approved by the RSC.

In the respective Terms of Reference of the RSC and AC, the members of the RSC and the AC will meet at least once a year to discuss significant risks and audit issues of the Group. The RSC held a total of five meetings during the year including a joint meeting with AC.

There is at least a member on the RSC who is also a member of the AC to facilitate communication and access of information between the two committees.

b) Risk Aware Culture and Training

Embedding the right culture throughout the organisation is important for effective risk management. The RSC recognises good culture fosters openness that will enable management and staff to escalate concerns in a timely manner without fear, as well as promote better judgment, which provides greater comfort to the Board and management.

As part of the risk awareness and communication programme, annual risk management training plans covering various risk topics are developed and implemented by the respective sectors, and the status of the

training is updated to the RSC at periodic intervals.

c) Risk Review Process

Under the ERM framework, a risk dashboard of the top 15 business risks (comprising the key inherent risks that may impact the business objectives) is developed and maintained by each of the significant business units, rolling up into a summary dashboard for each of the four business sectors – Aerospace, Electronics, Land Systems and Marine. Once the top business risks are identified, measures will then be taken to develop and implement risk preventive and mitigation actions (collectively known as “controls”) and risk monitoring processes. The business managers are required to periodically review the effectiveness of the controls implemented, and initiate necessary changes as the risk profile changes.

Quarterly, the Presidents and the Sector Chief Risk Officers review, with the RSC, their respective dashboard of material business risks. At the meetings, the Presidents and Sector Chief Risk Officers would discuss the risk management action plans and measures to address these risks. At the same time, the Presidents and Sector Chief Risk Officers would also highlight the following for discussion:

1) emerging trends and issues in each business sector

2) new risk or changes to existing risk profile

3) new risk incidents4) major risk exposures5) risk management actions

taken on previously identified risks

The RSC continues to monitor the implementation of risk management policies and procedures and receives updates to the risk registers maintained by the respective sectors. Major reviews include compliance with major laws and regulations, as well as business disruption risks and their continuity plans.

In addition, during the year the RSC reviewed with management the incident notification framework and cyber risk management framework.

d) Risk Management Self Assurance Process

The Risk Management Self Assurance is a process whereby the business risk owners, together with the respective control owners, evaluate and assess the operational effectiveness of the controls established to manage the key risks that are reported in the Sector Risk Dashboards.

On the basis of this self assessment, annually, the RSC will receive from the respective Sector Presidents and Sector Group Financial Controllers, written assurances on the adequacy and effectiveness of the system of risk management and controls to manage the significant risks.

CORPORATEGOVERNANCE

112 ST ENGINEERING

For more information on the Company’s risk management framework, please refer to the ST Engineering website www.stengg.com for details.

System of Internal Control and Risk Management

The Board receives, at regular intervals, updates from the Board Committees on the key business risks, the material controls to manage these risks, and the internal audit reports on the operational effectiveness of the material controls.

The Board has received assurance from the Group’s President & CEO and CFO on the effectiveness of the Company’s risk management and internal control systems, that the financial records have been properly maintained and that the financial statements give a true and fair view of the Company’s operations and finances.

The Board is satisfied with the risk management process in place, and, in its opinion, that the effectiveness and adequacy of the material controls to manage the key risks have been appropriately reviewed through the management self assurance process, as well as reasonable independent assurance provided by the Company’s IA Function.

Based on the internal controls and risk management process established and maintained by the Group, work performed by the internal and external auditors, and reviews performed

by management and various Board Committees, the Board is satisfied that the Group’s framework of internal controls (including financial, operational, compliance and information technology controls) as well as the risk management systems are adequate and effective as at 31 December 2018. The AC concurs with the Board on the adequacy and effectiveness of the internal controls and risk management systems established and maintained by the Group as at 31 December 2018.

The Board is satisfied that problems are identified on a timely basis and follow up actions are taken promptly to minimise lapses. The Board, through the Board Committees, is supported in these areas by the Internal Audit and Risk Management teams of the Company. In this regard, the Board also notes that no system can provide absolute assurance against the occurrence of material errors, poor judgment in decision making, human error, fraud or other irregularities.

Strategy & Finance Committee

The SFC comprises Kwa Chong Seng as Chairman, Dr Beh Swan Gin, Lim Sim Seng, Lim Ah Doo and Vincent Chong. The SFC’s role includes guiding management in the development and execution of the Group’s strategies as well as to consider and approve tender proposals which are above established contract value limit.

During the year, the SFC held four meetings of which one meeting was to discuss the Group’s long-term strategy and initiatives, as well as the drivers, constraints, opportunities and challenges for each of the business areas. The SFC also reviewed the 2019 Budget and five-year plan prior to submission to the Board for approval as well as approve tender proposals which are above established contract value limit.

SHAREHOLDER RIGHTS AND RESPONSIBILITIES

Shareholder Rights(Principle 14)Communication withShareholders(Principle 15)Conduct of Shareholder Meetings(Principle 16)

At all times, ST Engineering is committed to disclosing material information in a timely, transparent and accurate manner in accordance with the Code.

All disclosures submitted to the Singapore Exchange Securities Trading Limited (“SGX-ST”) through SGXNET are made available on the Group’s corporate website at www.stengg.com.

The Investor Relations team and designated senior spokespersons establish and maintain regular dialogue with shareholders, media, analysts and the investment


community through analyst and media briefings, facility visits, as well as investor roadshows and conferences. These platforms provide opportunities to present our business and investment case, as well as enable us to solicit and understand views of our stakeholders.

While we provide reasonable access to shareholders, media, analysts and the investment community to help them develop informed opinions of the Group, we do not respond or comment on rumours, market speculation, or forward projections of financial figures. In situations where the rumours or speculative news reports are materially incorrect or misleading, the Group may issue a clarification or confirmation statement through SGXNET.

The Group observes a “blackout period” of two weeks prior to the announcement of quarterly results. During this period, we do not comment on industry outlook, the Group’s business performance and financial results, neither do we participate in any investor meetings or conferences or proactively engage the financial media.

On dividend, the Company aims to provide shareholders

with a sustainable dividend return and has historically, been declaring interim and final dividends.

At general meetings of shareholders, we facilitate the opportunity for shareholders to participate effectively. Board members are present at these meetings where shareholders can seek clarification or question the Board on issues pertaining to the resolutions proposed before they are voted on. The external auditors are also present to assist the directors in answering questions on audit related matters. A copy of the AGM minutes is made available on the Group’s corporate website at www.stengg.com.

At the AGM in April 2018, the President & CEO, delivered a presentation at the start of the meeting, to update shareholders on the Group’s business performance and provide an overview of the focus areas for the next growth phase.

To ensure authenticity of shareholder identity and due to other related security issues, the Company currently does not allow voting in absentia by mail, email or fax.

For transparency in the voting process, ST Engineering has, since 2010, adopted the use of electronic poll voting for all the resolutions put to vote at its AGMs and Extraordinary General Meetings (EGMs). This is a fair and transparent way of voting based on the principle of one share one vote. The electronic process on how to vote is explained at the AGMs and EGMs. The Company also appoints an independent external party as scrutineer for the electronic poll voting. Prior to the AGMs and EGMs, the scrutineer will review the proxies and the electronic poll voting system, and be present at the proxy verification process, to ensure that the proxy and poll voting information is compiled correctly. The scrutineer attends the AGM to ensure that the polling process is properly carried out. Votes cast, for or against and the respective percentages, on each resolution are tallied and displayed ‘live’ on-screen to shareholders immediately after the voting. Each proposal is put to the vote as a separate resolution at general meetings. We do not “bundle” resolutions, unless the resolutions are interdependent and linked so as to form one significant proposal.

CORPORATEGOVERNANCE

114 ST ENGINEERING

CODE OF CORPORATE GOVERNANCE 2012

SUMMARY OF DISCLOSURES

Principle and Guidelines Description

Page Reference in ST Engineering Annual Report 2018

Guideline 1.1 Board’s Role Page 94

Guideline 1.2 All directors must objectively discharge their duties and responsibilities at all times as fiduciaries in the interests of the company

Page 94

Guideline 1.3 Delegation of authority, by the Board to any board committee, to make decisions on certain board matters

Page 94

Guideline 1.4 The number of meetings of the Board and board committees held in the year, as well as the attendance of every board member at these meetings

Pages 95 - 96

Guideline 1.5 The type of material transactions that require board approval under guidelines

Page 94

Guideline 1.6 The induction, orientation and training provided to new andexisting directors

Page 94

Guideline 2.1 There should be a strong and independent element on the Board, with independent directors making up at least one-third of the Board.

Page 97

Guideline 2.2 Independent directors should make up at least half of the Board where the Chairman of the Board and the CEO is the same person or are immediate family members, or the Chairman is part of the management team or the Chairman is not an independent director.

Pages 97 - 98




Guideline 2.3 The Board should identify in the company’s Annual Report each director it considers to be independent. Where the Board considers a director to be independent in spite of the existence of a relationship as stated in the Code that would otherwise deem a director not to be independent, the nature of the director’s relationship and the reasons for considering him as independent should be disclosed

Page 97

Guideline 2.4 Where the Board considers an independent director, who has served on the Board for more than nine years from the date of his first appointment, to be independent, the reasons for considering him as independent should be disclosed

NA

Guideline 2.5 The Board should examine its size and, with a view to determining the impact of the number upon effectiveness, decide on what it considers an appropriate size for the Board, which facilitates effective decision making.

Page 97

Guideline 2.6 The Board and its board committees should comprise directors who as a group provide an appropriate balance and diversity of skills, experience, gender and knowledge of the company.

Page 97

Guideline 2.7 Role of non-executive directors Page 94

Guideline 2.8 To facilitate a more effective check on Management, non-executive directors are encouraged to meet regularly without the presence of Management.

Page 95

Guideline 3.1 Relationship between the Chairman and the CEO where they are immediate family members

Page 98

Guideline 3.2 Role of Chairman of the Board Page 98

Guideline 3.3 Appointment of a lead independent director Page 98

CORPORATEGOVERNANCE

116 ST ENGINEERING



Guideline 3.4 Periodic meeting of independent directors without the presence of other directors and lead independent director to provide feedback to the Chairman after such meetings.

NA

Guideline 4.1 Names of the members of the NC and the key terms of reference of the NC, explaining its role and the authority delegated to it by the Board

Pages 98 - 99

Guideline 4.2 NC should make recommendations to the Board on relevant matters relating to the process for the selection, appointment and re-appointment of directors include composition and progressive renewal of the Board and each director’s competencies, commitment, contribution and performance. All directors should be required to submit themselves for re-nomination and re-appointment at regular intervals and at least once every three years.

Pages 98 - 99

Guideline 4.3 The NC is charged with the responsibility of determining annually, and as and when circumstances require, if a director is independent, bearing in mind the circumstances set forth in Guidelines 2.3 and 2.4 and any other salient factors.

Pages 98 - 99

Guideline 4.4 The maximum number of listed company board representations which directors may hold should be disclosed

Page 99

Guideline 4.5 Appointment of alternate directors. Page 97

Guideline 4.6 Process for the selection, appointment and re-appointment of new directors to the Board, including the search and nomination process

Pages 98 - 99

Guideline 4.7 Key information regarding directors, including which directors are executive, non-executive or considered by the NC to be independent

Page 97See also pages 14 - 18




Guideline 5.1 The Board should state in the company’s Annual Report how assessment of the Board, its board committees and each director has been conducted. If an external facilitator has been used, the Board should disclose in the company’s Annual Report whether the external facilitator has any other connection with the company or any of its directors. This assessment process should be disclosed in the company’s Annual Report

Page 99

Guidelines 5.2 and 5.3

Evaluation of the Board and individual directors Page 99

Guidelines 6.1 to 6.3

Board should have separate and independent access to Management and company secretary. Directors are entitled to request from Management and should be provided with such additional information as needed to make informed decisions.

Page 101

Guideline 6.4 The appointment and the removal of the company secretary should be a matter for the Board as a whole.

Page 101

Guideline 6.5 Procedure for directors, either individually or as a group, in the furtherance of their duties, to take independent professional advice, if necessary, and at the company’s expense.

Page 101

Guideline 7.1 Names of the members of the RC and the key terms of reference of the RC, explaining its role and the authority delegated to it by the Board

Pages 101 - 102

Guideline 7.2 RC should review and recommend to the Board a general framework of remuneration for the Board and key management personnel.

Pages 101 - 105

Guideline 7.3 Names and firms of the remuneration consultants (if any) should be disclosed in the annual remuneration report, including a statement on whether the remuneration consultants have any relationships with the company

Page 102

CORPORATEGOVERNANCE

118 ST ENGINEERING



Guideline 7.4 RC should review the company’s obligations arising in the event of termination of the executive directors’ and key management personnel’s contracts of service, to ensure that such contracts of service contain fair and reasonable termination clauses which are not overly generous

Page 104

Principle 8Guidelines 8.1 to 8.4

The level and structure of remuneration should be aligned with the long-term interest and risk policies of the company, and should be appropriate to attract, retain and motivate the directors and key management personnel

Pages 102 - 105

Principle 9 Clear disclosure of remuneration policies, level and mix of remuneration, and procedure for setting remuneration

Pages 102 - 105

Guideline 9.1 Remuneration of directors, the CEO and at least the top five key management personnel (who are not also directors or the CEO) of the company. The annual remuneration report should include the aggregate amount of any termination, retirement and post-employment benefits that may be granted to directors, the CEO and the top five key management personnel (who are not directors or the CEO)

Pages 106 - 108

Guideline 9.2 Fully disclose the remuneration of each individual director and the CEO on a named basis. There will be a breakdown (in percentage or dollar terms) of each director’s and the CEO’s remuneration earned through base/fixed salary, variable or performance-related income/bonuses, benefits in kind, stock options granted, share-based incentives and awards, and their long-term incentives

Pages 106 - 107

Guideline 9.3 Name and disclose the remuneration of at least the top five key management personnel (who are not directors or the CEO) in bands of S$250,000. There will be a breakdown (in percentage or dollar terms) of each key management personnel’s remuneration earned through base/fixed salary, variable or performance-related income/bonuses, benefits in kind, stock options granted, share-based incentives and awards, and other long-term incentives. In addition, the company should disclose in aggregate the total remuneration paid to the top five key management personnel (who are not directors or the CEO). As best practice, companies are also encouraged to fully disclose the remuneration of the said top five key management personnel

Page 108




Guideline 9.4 Details of the remuneration of employees who are immediate family members of a director or the CEO, and whose remuneration exceeds S$50,000 during the year. This will be done on a named basis with clear indication of the employee’s relationship with the relevant director or the CEO. Disclosure of remuneration should be in incremental bands of S$50,000

Page 104

Guideline 9.5 Details and important terms of employee share schemes Pages 102 - 104

Guideline 9.6 For greater transparency, companies should disclose moreinformation on the link between remuneration paid to theexecutive directors and key management personnel, andperformance. The annual remuneration report should set out a description of performance conditions to which entitlement to short-term and long-term incentive schemes are subject, an explanation on why such performance conditions were chosen, and a statement of whether such performance conditions are met.

Pages 102 - 104

Principle 10Guidelines 10.1 to 10.3

The Board should present a balanced and understandable assessment of the company’s performance, position and prospects

Page 108

Guideline 11.1 The Board should determine the company’s levels of risk tolerance and risk policies, and oversee Management in the design, implementation and monitoring of the risk management and internal control systems.

Pages 111 - 113

Guideline 11.2 The Board should, at least annually, review the adequacy and effectiveness of the company’s risk management and internal control systems, including financial, operational, compliance and information technology controls. Such review can be carried out internally or with the assistance of any competent third parties.

Page 113

CORPORATEGOVERNANCE

120 ST ENGINEERING



Guideline 11.3 The Board should comment on the adequacy and effectiveness of the internal controls, including financial, operational, compliance and information technology controls, and risk management systems.

The commentary should include information needed by stakeholders to make an informed assessment of the company’s internal control and risk management systems.

The Board should also comment on whether it has received assurance from the CEO and the CFO: (a) that the financial records have been properly maintained and the financial statements give true and fair view of the company’s operations and finances; and (b) regarding the effectiveness of the company’s risk management and internal control systems.

Page 113

Page 113

Guideline 11.4 The Board may establish a separate board risk committee or otherwise assess appropriate means to assist it in carrying out its responsibility of overseeing the company’s risk management framework and policies.

Pages 111 - 113

Guideline 12.1 Names of the members of the AC and the key terms of reference of the AC, explaining its role and the authority delegated to it by the Board

Pages 109 - 110

Guideline 12.2 Members of the AC should be appropriately qualified to discharge their responsibilities. At least two members, including the AC Chairman, should have recent and relevant accounting or related financial management expertise or experience, as the Board interprets such qualification in its business judgement.

Page 109

Guideline 12.3 The AC should have explicit authority to investigate any matter within its terms of reference, full access to and co-operation by Management and full discretion to invite any director or executive officer to attend its meetings, and reasonable resources to enable it to discharge its functions properly.

Page 109

Guideline 12.4 Duties of AC Page 109




Guideline 12.5 The AC should meet (a) with the external auditors, and (b) with the internal auditors, in each case without the presence of Management, at least annually.

Page 109

Guideline 12.6 Aggregate amount of fees paid to the external auditors for that financial year, and breakdown of fees paid in total for audit and non-audit services respectively, or an appropriate negative statement

Page 110

Guideline 12.7 The existence of a whistle-blowing policy should be disclosed in the company’s Annual Report

Page 109

Guideline 12.8 Summary of the AC’s activities and measures taken to keep abreast of changes to accounting standards and issues which have a direct impact on financial statements

Pages 109 - 111

Guideline 12.9 A former partner or director of the company’s existing auditing firm or auditing corporation should not act as a member of the company’s AC: (a) within a period of 12 months commencing on the date of his ceasing to be a partner of the auditing firm or director of the auditing corporation; and in any case (b) for as long as he has any financial interest in the auditing firm or auditing corporation.

Page 109

Guideline 13.1 Internal Auditor’s (IA) primary line of reporting should be to the AC Chairman although the IA would also report administratively to the CEO.

The AC approves the hiring, removal, evaluation and compensation of the head of the IA function, or the accounting/auditing firm or corporation to which the IA function is outsourced. The IA should have unfettered access to all the company’s documents, records, properties and personnel, including access to the AC.

Page 111

Guideline 13.2 The AC should ensure that the IA function is adequately resourced and has appropriate standing within the company

Pages 110 - 111

Guideline 13.3 The IA function should be staffed with persons with the relevant qualifications and experience

Pages 110 - 111

CORPORATEGOVERNANCE

122 ST ENGINEERING



Guideline 13.4 The IA should carry out its function according to the standards set by nationally or internationally recognised professional bodies including the Standards for the Professional Practice of Internal Auditing set by The Institute of Internal Auditors

Page 111

Guideline 13.5 The AC should, at least annually, review the adequacy and effectiveness of the IA function

Page 111

Guideline 14.1 Companies should facilitate the exercise of ownership rights by all shareholders

Page 114

Guideline 14.2 Companies should ensure that shareholders have the opportunity to participate effectively in and vote at general meetings of shareholders. Shareholders should be informed of the rules, including voting procedures, that govern general meetings of shareholders

Pages 113 - 114

Guideline 15.1 Companies should devise an effective investor relations policy to regularly convey pertinent information to shareholders

Pages 113 - 114

Guideline 15.2 Companies should disclose information on a timely basis through SGXNET and other information channels, including a well-maintained and updated corporate website. Where there is inadvertent disclosure made to a select group, companies should make the same disclosure publicly to all others as promptly as possible.

Page 113

Guideline 15.3 The Board should establish and maintain regular dialogue with shareholders, to gather views or inputs, and address shareholders’ concern.

Pages 113 - 114

Guideline 15.4 The steps the Board has taken to solicit and understand the views of the shareholders e.g. through analyst briefings, investor roadshows or Investors’ Day briefings

Pages 113 - 114

Guideline 15.5 Where dividends are not paid, companies should disclose their reasons.

NA




Guideline 16.1 Shareholders should have the opportunity to participate effectively in and to vote at general meetings of shareholders. Companies should make the appropriate provisions in their Articles of Association (or other constitutive documents) to allow for absentia voting at general meetings of shareholders.

Page 114

Guideline 16.2 There should be separate resolutions at general meetings on each substantially separate issue.

Page 114

Guideline 16.3 All directors should attend general meetings of shareholders. In particular, the Chairman of the Board and the respective Chairman of the AC, NC and RC should be present and available to address shareholders’ queries at these meetings. The external auditors should also be present to address shareholders’ queries about the conduct of audit and the preparation and content of the auditors’ report.

Page 114

Guideline 16.5 Companies should put all resolutions to vote by poll and make an announcement of the detailed results showing the number of votes cast for and against each resolution and the respective percentages. Companies are encouraged to employ electronic polling.

Page 114

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124 ST ENGINEERING

Directors’ Statement 126

Independent Auditors’ Report 135

Financial Statements 142

Consolidated Income Statement 144

Consolidated Statement of Comprehensive Income

145

Consolidated Balance Sheet 146

Consolidated Statement of Changes in Equity

148

Consolidated Statement of Cash Flows 152

Notes to the Financial Statements 154

Sectoral Financial Review 275

Shareholding Statistics 291

SGX Listing Manual Requirements 293

DIRECtoRS’StAtEMENt31 DECEMBER 2018(CURRENCY – SINGAPoRE DoLLARS UNLESS othERwISE StAtED)

We are pleased to submit this annual report to the members of the Company together with the audited financial statements of the Group and of the Company for the financial year ended 31 December 2018.

In our opinion:

(a) the financial statements set out on pages 142 to 274 are drawn up so as to give a true and fair view of the financial position of the Group and of the Company as at 31 December 2018, and changes in equity, financial performance and cash flows of the Group for the year ended on that date in accordance with the provisions of the Singapore Companies Act, Chapter 50 and Singapore Financial Reporting Standards (International); and

(b) at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.

The Board of Directors has, on the date of this statement, authorised these financial statements for issue.

Directors

The directors of the Company in office at the date of this statement are as follows:

Kwa Chong Seng (Chairman)Vincent Chong Sy FengQuek See TiatLG Ong Su Kiat Melvyn (Appointed on 8 June 2018)Quek Gim PewKhoo Boon HuiDr Beh Swan GinLim Sim SengLim Ah DooLim Chin Hu (Appointed on 16 July 2018)Song Su-Min (Appointed on 16 September 2018)COL Xu Youfeng (Appointed alternate Director to LG Ong Su Kiat Melvyn on 8 June 2018)

ArrAngements to enAble Directors to Acquire shAres or Debentures

Except for the Singapore Technologies Engineering Performance Share Plan 2010 (PSP2010) and Singapore Technologies Engineering Restricted Share Plan 2010 (RSP2010) (collectively the ST Engineering Share Plans), neither at the end of nor at any time during the financial year was the Company a party to any arrangement whose objects are, or one of whose objects is, to enable the directors of the Company to acquire benefits by means of the acquisition of shares in or debentures of the Company or any other body corporate.

126 ST ENGINEERING


Directors’ interests

Except as disclosed in this statement, no director who held office at the end of the financial year had interests in shares, debentures, warrants, share options or awards of the Company or of related corporations either at the beginning of the financial year or date of appointment if later, or at the end of the financial year.

According to the register kept by the Company for the purposes of Section 164 of the Singapore Companies Act, Chapter 50, particulars of interests of directors who held office at the end of the financial year in shares, debentures, warrants, share options and awards in the Company and its related corporations were as follows:

holdings in the name of the director, spouse or infant children

1 January 2018 or date of

appointmentif later 31 December 2018

the company

Ordinary Shares

Kwa Chong Seng 975,600 *1 1,027,300 *1

Vincent Chong Sy Feng 1,467,089 1,568,084Quek See Tiat 34,200 45,400Khoo Boon Hui 21,700 34,800Lim Sim Seng 18,100 *2 35,600 *2

Lim Ah Doo 42,600 60,000Lim Chin Hu 20,000 *2 20,000 *2

Conditional Award of Shares under PSP2010 for performance period 2015 to 2017

Vincent Chong Sy Feng (126,000 shares) 0 to 214,200 #1 – #2


Vincent Chong Sy Feng (70,000 shares) 0 to 119,000 #1 0 to 119,000 #1


Vincent Chong Sy Feng (258,800 shares) 0 to 439,960 #1 0 to 439,960 #1


Vincent Chong Sy Feng (428,600 shares) – 0 to 728,620 #1

127ANNUAL REPoRt 2018


Directors’ interests (continued)




the company

Unvested shares under RSP2010 arising from release of Conditional Award for performance period 1 January 2015 to 31 December 2015

Vincent Chong Sy Feng (64,676 shares) 32,338 #3 16,169 #3

Conditional Award of Shares under RSP2010 for performance period 1 January 2017 to 31 December 2017

Vincent Chong Sy Feng (72,800 shares) 0 to 109,200 #4 – #5

Unvested shares under RSP2010 arising from release of Conditional Award for performance period 1 January 2017 to 31 December 2017

Vincent Chong Sy Feng (82,264 shares) – 61,698 #3

Conditional Award of Shares under RSP2010 for performance period 1 January 2018 to 31 December 2018

Vincent Chong Sy Feng (180,800 shares) – 180,800 #4

related corporations

Ascendas Funds management (s) limitedUnit holdings in Ascendas Real Estate Investment Trust

Quek See Tiat 34,000 34,000

Ascendas hospitality Fund management Pte. ltd.Unit holdings in Ascendas Hospitality Trust

Lim Chin Hu 198,000 *2 198,000 *2

128 ST ENGINEERING







Astrea iV Pte. ltd.Class A-1 4.35% Secured Fixed Rate Bonds

Khoo Boon Hui – $73,000

mapletree industrial trust management ltd.Unit holdings in Mapletree Industrial Trust

Lim Chin Hu 121 121

mapletree logistics trust management ltd.Unit holdings in Mapletree Logistics Trust

Lim Ah Doo 185,000 185,000

mapletree north Asia commercial trust management ltd. (formerly known as mapletree greater china commercial trust management ltd.)

Unit holdings in Mapletree North Asia Commercial Trust

Khoo Boon Hui 300,000 300,000

olam international limitedOrdinary Shares

Kwa Chong Seng 609,279 *3 609,279 *3

Combined S$350m 5.5% Perpetual Capital Securities

Lim Chin Hu $250,000 *2 $250,000 *2

singapore telecommunications limitedOrdinary Shares

Kwa Chong Seng 26,466 26,466Quek See Tiat 680 680Quek Gim Pew 3,120 3,120Khoo Boon Hui 3,087 3,087Song Su-Min 190 190








starhub ltdOrdinary Shares

Quek See Tiat 5,000 5,000Song Su-Min 140,600 140,600

temasek Financial (i) limitedT2028 USD 10-year Temasek Bond 3.625% coupon due August 2028

Lim Chin Hu – US$250,000

temasek Financial (iV) Private limitedT2023 SGD Temasek Bond S$500m 2.70% coupon due October 2023

Quek See Tiat – $7,000Quek Gim Pew – $14,000

*1 Includes interest in 300,000 shares in Singapore Technologies Engineering Ltd, held in trust by a trustee company on behalf of the director.

*2 Held in trust by a trustee company on behalf of the director.*3 Includes interest in 189,279 shares in Olam International Limited, held in trust by a trustee company on behalf of the director.#1 A minimum threshold performance over a 3-year period is required for any performance shares to be released and the actual

number of performance shares to be released is capped at 170% of the conditional award.#2 For this period, Mr Vincent Chong Sy Feng was awarded 64,260 shares upon partial achievement of targets set. The balance of the

conditional award covering the period from 2015 to 2017 has thus lapsed.

#3 Balance of unvested restricted shares to be released according to the stipulated vesting periods. #4 A minimum threshold performance over a 1-year period is required for any restricted shares to be released. A specified number of

restricted shares to be released will depend on the extent of achievement of all performance conditions and will be delivered in phases according to the stipulated vesting periods.

#5 For this period, Mr Vincent Chong Sy Feng was awarded 82,264 shares upon partial achievement of targets set. The balance of the conditional award covering the period from 1 January 2017 to 31 December 2017 has thus lapsed.

There was no change in any of above-mentioned directors’ interest in the Company between the end of the financial year and 21 January 2019.

130 ST ENGINEERING


shAre PlAns

The Executive Resource and Compensation Committee (ERCC) is responsible for administering the ST Engineering Share Plans.

The ERCC members are Mr Kwa Chong Seng (Chairman), Dr Stanley Lai (until 31 December 2018), Mr Lim Sim Seng and Mr Lim Chin Hu.

As at 31 December 2018, no participants have been granted options and/or have received shares under the ST Engineering Share Plans which, in aggregate, represent 5% or more of the total number of new shares available under the ST Engineering Share Plans.

The aggregate number of new shares issued pursuant to the RSP2010 and PSP2010 did not exceed 8% of the issued share capital of the Company.

Except as disclosed below, there were no shares awarded by the Company to any person to take up unissued shares of the Company.

(a) PSP2010 (PSP)

The PSP is established with the objective of motivating Senior Management Executives to strive for sustained long-term growth and performance in ST Engineering and its subsidiaries (ST Engineering Group). Awards of performance shares are granted conditional on performance targets set based on the ST Engineering Group corporate objectives.

Pursuant to the PSP, the ERCC has decided to grant awards on an annual basis, conditional on targets set for a performance period, currently prescribed to be a 3-year performance period. The performance shares will only be released to the recipient at the end of the performance qualifying period. A specified number of performance shares shall be released by the ERCC to the recipient and the actual number of performance shares will depend on the achievement of set targets over the respective performance period. A minimum threshold performance is required for any performance share to be released and the actual number of performance shares to be released is capped at 170% of the conditional award.

The performance measures used in PSP grants are Absolute Total Shareholder Return (TSR) against Cost of Equity hurdles (i.e. measure of absolute Wealth Added); and Earnings Per Share (EPS) Growth against pre-determined targets. In addition to the PSP performance targets being met, final award for PSP is conditional upon satisfactory performance of the recipient.



shAre PlAns (continued)

(a) PSP2010 (PSP) (continued)

The awards granted under the PSP2010 are as follows:

Participant

conditional awards

granted during the

financial year under

review

Awards released

during the financial

year under review

Aggregate conditional

awards granted since

commencementto end of

financial yearunder review

Aggregateawards

released since commencement

to end of financial yearunder review

Aggregateconditional awards notreleased as

at end offinancial

year under review

PsP2010

Director of the company

Vincent Chong Sy Feng 0 to 728,620 64,260 0 to 1,501,780 64,260 0 to 1,287,580

group executives (including Vincent chong sy Feng) 0 to 2,931,718 842,788 0 to 21,777,323 3,917,831 0 to 8,190,657

(b) RSP2010 (RSP)

The RSP is established with the objective of motivating managers and above to strive for sustained long-term growth of ST Engineering Group. It also aims to foster a share ownership culture among employees within the ST Engineering Group and to better align employees’ incentive with shareholders’ interest.

Pursuant to the RSP, the ERCC has decided to grant time-based shares on an annual basis, and released equally to the recipient over four consecutive years.

Since 2011, the awards granted under the ST Engineering RSP2010 to the Non-Executive Directors (other than those from the public sector) are outright shares with no performance and vesting conditions but with a Moratorium on selling. These shares will form up to 30% of their total compensation with the remaining 70% payable in cash.

132 ST ENGINEERING


shAre PlAns (continued)

(b) RSP2010 (RSP) (continued)

The awards granted under the RSP2010 are as follows:

Participant

conditional awards/awards

granted during the

financial year under

review

Awards released

during the financial

year under review

Aggregate conditional

awards/awardsgranted since

commencement to end of

financial yearunder review

Aggregate awards

released sincecommencement

to end of financial

year under review

Aggregate awards

not released

as at end of

financial year

Aggregate conditional awards not released as

at end of financial

year under review

rsP2010

Directors of the company

Kwa Chong Seng 51,700 51,700 227,300 227,300 – –Vincent Chong Sy Feng 180,800 36,735 0 to 1,805,751 1,473,824 77,867 180,800Quek See Tiat 11,200 11,200 45,400 45,400 – –Khoo Boon Hui 13,100 13,100 34,800 34,800 – –Lim Sim Seng 17,500 17,500 35,600 35,600 – –Lim Ah Doo 17,400 17,400 30,000 30,000 – –

non-executive Directors of the company and its subsidiaries (including current and former directors) 160,700 160,700 1,203,100 1,203,100 – –

group executives (including Vincent chong sy Feng) 6,546,545 4,389,487 0 to 64,683,701 25,077,339 6,402,463 6,098,824



AuDit committee

The Audit Committee comprises four independent non-executive directors, one of whom is also the Chairman of the Committee. The members of the Audit Committee at the date of this report are as follows:

Quek See Tiat (Chairman)Khoo Boon HuiLim Ah DooSong Su-Min

The Audit Committee carried out its functions in accordance with Section 201B of the Singapore Companies Act, Chapter 50, the SGX Listing Manual and the Code of Corporate Governance.

The Audit Committee met during the year to review the scope of the internal audit functions and the scope of work of the statutory auditors, and the results arising therefrom, including their evaluation of the system of internal controls. The Audit Committee also reviewed the assistance given by the Company’s officers to the auditors. The consolidated financial statements of the Group and the financial statements of the Company were reviewed by the Audit Committee prior to their submission to the directors of the Company for adoption.

In addition, the Audit Committee has reviewed the requirements for approval and disclosure of interested person transactions, reviewed the procedures set up by the Group and the Company to identify and report and where necessary, seek approval for interested person transactions and, with the assistance of the internal auditors, reviewed interested person transactions.

The Audit Committee has full access to management and is given the resources required for it to discharge its functions. It has full authority and the discretion to invite any director or executive officer to attend its meetings. The Audit Committee also recommends the appointment of the external auditors and reviews the level of audit and non-audit fees.

The Audit Committee has recommended to the Board of Directors that the auditors, KPMG LLP, be nominated for re-appointment as auditors at the forthcoming Annual General Meeting of the Company.

The Company has complied with Rules 712 and 715 of the SGX Listing Manual in relation to the engagement of its auditors.

AuDitors

The Auditors, KPMG LLP, have indicated their willingness to accept re-appointment.

On behalf of the Board of Directors

Kwa chong seng Vincent chong sy FengDirector Director

Singapore20 February 2019

134 ST ENGINEERING

INDEPENDENt AUDItoRS’ REPoRtMEMBERS oF thE CoMPANYSINGAPoRE tEChNoLoGIES ENGINEERING LtD

rePort on the FinAnciAl stAtements

opinion

We have audited the accompanying financial statements of Singapore Technologies Engineering Ltd (the Company) and its subsidiaries (the Group), which comprise the balance sheets of the Group and the Company as at 31 December 2018, the consolidated statement of changes in equity, the consolidated income statement, the consolidated statement of comprehensive income and the consolidated statement of cash flows of the Group for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, as set out on pages 142 to 274.

In our opinion, the accompanying consolidated financial statements of the Group and the balance sheet of the Company are properly drawn up in accordance with the provisions of the Singapore Companies Act, Chapter 50 (the Act) and Singapore Financial Reporting Standards (International) (SFRS(I)s) so as to give a true and fair view of the financial position of the Group and Company as at 31 December 2018, and changes in equity, financial performance and cash flows of the Group for the year ended on that date.

basis for opinion

We conducted our audit in accordance with Singapore Standards on Auditing (SSAs). Our responsibilities under those standards are further described in the ‘Auditor’s responsibilities for the audit of the financial statements’ section of our report. We are independent of the Group in accordance with the Accounting and Corporate Regulatory Authority (ACRA) Code of Professional Conduct and Ethics for Public Accountants and Accounting Entities (ACRA Code) together with the ethical requirements that are relevant to our audit of the financial statements in Singapore, and we have fulfilled our other ethical responsibilities in accordance with these requirements and the ACRA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.



the KeY AuDit mAtter hoW WAs the mAtter ADDresseD in our AuDit

Impairment of non-financial assets, including goodwill and other intangible assets

Goodwill, intangible assets form 15% of the Group’s total assets.

The Group uses the discounted cash flow (DCF) technique to determine the recoverable amounts of each cash-generating unit (CGU).

There is a risk of impairment of certain CGUs in the United States which are operating in challenging business environment. This increases the level of judgement and estimation uncertainties within management’s cash flow forecast.

Our procedures included, among others:

• WeevaluatedtheidentificationofCGUswithintheGroup against the requirements of the accounting standards.

• Wereviewedthebasisandmethodologyadoptedto arrive at the recoverable amounts of the CGUs.

• We assessed the key assumptions used in thecash flow projections, namely sales growth rates, earnings before interest, depreciation and amortisation (EBIDA) growth rates, discount rates, terminal growth rates by comparing the Group’s assumptions to externally derived data where available.

• WereviewedthehistoricalaccuracyoftheGroup’sestimates in the previous periods, identified and analysed changes in the assumptions from prior periods, focusing particularly on those CGUs operating in challenging business environment.

• We have also assessed the adequacy of relateddisclosures in Note C2 to the financial statements.

Findings:

We found that the assumptions and resulting estimates used in the DCF projections for all the CGUs were within acceptable range.

There were two CGUs in the United States with growth estimates that exceeded historical performance as it includes potential growth opportunities the CGUs are pursuing. In these instances, we have re-computed the recoverable amount using reduced growth estimates and we agree with management that no impairment charge is required for these CGUs.

Overall, the results of our evaluation of the Group’s impairment charge are consistent with management’s assessment.

We found the Group’s disclosure provides sufficient details on the sensitivity of the impairment assessment to variations in key assumptions.

136 ST ENGINEERING



Impairment of property, plant and equipment – Roll-on/Roll-off Passenger ferry (ROPAX)

The carrying amount of a ROPAX vessel, which is chartered out on a short term operating lease, representing a significant balance within the boats and barges class of property, plant and equipment may exceed its recoverable amount.

ST Engineering Marine (STEML) was awarded a contract to design and build the ROPAX vessel in 2007. The contract was subsequently terminated in 2011, resulting in STEML taking title of the vessel. Since the repossession of the vessel, management has tried to realise the value of the vessel through sale and charter. Limited market demand for such a vessel led to difficulties in selling or chartering the vessel out on a long-term basis, resulting in write downs of the carrying value of the ROPAX between 2011 and 2013, to reflect its net realisable value. Since then, the ROPAX has been put to use through short term chartering arrangements. The vessel is currently under a two-year charter, with an option for the lessee to purchase the vessel in the first year of lease.

The Group evaluated the recoverable amount of the ROPAX using the DCF technique across three scenarios where the ROPAX is chartered or disposed, weighted based on likelihood of outcomes to derive at a recoverable amount for the ROPAX.

There are inherent uncertainties involved in estimating the recoverable amount of the ROPAX as it is dependent on the current economic conditions and whether the carrying amount can be realised through future sale or other chartering arrangements.

Our procedures included, amongst others:

• Weassessedthefactorsrelevanttothe likelihoodof the outcome of each scenario.

• We considered another possible leasing scenariothat could happen and computed the recoverable amount after incorporating the additional scenario and compared it to the carrying amount of the ROPAX.

• We evaluated the key assumptions used in thereview, particularly charter rates by comparing to the rates used in existing lease arrangement and externally derived data where available.

• We compared the discount rate used bymanagement to our calculations based on market data.

Findings:

The results of our evaluation of the valuation of the ROPAX are consistent with management’s assessment that no further impairment charge is required. Nonetheless, uncertainties remain over the probability of securing longer term chartering arrangements or selling the vessel that may change the estimated recoverable amount.




Revenue recognition

In accordance with SFRS(I) 15 Revenue from Contracts with Customers, the analysis of whether the contracts comprise one or more performance obligations, determination of whether variable consideration are allocated to one or more performance obligations, and whether the performance obligations are satisfied over time or at a point in time are areas requiring critical judgement and estimates by the Group.

The Group’s three largest revenue streams are derived from the sale of goods, rendering of services and long-term contract revenues.

Some of these revenue streams have contracts that are accounted for based on the stage of completion of performance obligations of each individual contract. The amount of revenue and profit recognised is dependent on management’s assessment on the stage of completion of each performance obligation and the forecast cost profile of each long-term contract. As long-term contracts can extend over multiple years, changes in conditions and circumstances over time can result in changes in the nature or extent of project cost incurred.

Judgement is applied in determining each performance obligation within a contract and in forecasting the costs to be incurred, the overall margins of these performance obligations and assessment of the stage of completion of each performance obligation. Such estimates are inherently judgemental.

Our procedures included, amongst others:

• Wereviewedthecontractualtermsandworkstatusof the customer contracts and verified that revenue is recognised according to the stage of completion of each performance obligation.

• We tested the controls designed and applied bythe Group to ensure that the estimates used in assessing revenue and costs are appropriate. The controls tested include, amongst others, controls over the preparation and authorisation of project evaluation, approval of revenue calculated and project budgets, and accuracy and completeness over manpower and labour rates computed.

• Weselectedasampleofcontractsfortestingbasedon a number of qualitative and quantitative factors, such as contracts with significant deterioration in margin, those contracts with variations, claims and other factors which indicated that a greater level of judgement is required in the estimates developed for current and forecast contract performance.

• For each selected contract, we assessed theappropriateness of estimates used in the forecasts and whether the estimates showed any evidence of management bias.

• We evaluated the revenue recognition policiesof the Group for the different revenue streams to ensure revenue is recognised appropriately.

Findings:

We found the basis over identification of performance obligations and the revenue recognised based on the stage of completion of each performance obligation to be fair.

138 ST ENGINEERING


other information

Management is responsible for the other information contained in the annual report. Other information is defined as all information in the annual report other than the financial statements and our auditors’ report thereon.

We have obtained all other information prior to the date of this auditors’ report except for Shareholding Statistics which is expected to be made available to us after that date.

Our opinion on the financial statements does not cover the other information and we do not and will not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.

If, based on the work we have performed on the other information that we obtained prior to the date of this auditors’ report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

When we read Shareholding Statistics, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those charged with governance and take appropriate actions in accordance with SSAs.

responsibilities of management and directors for the financial statements

Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the provisions of the Act and SFRS(I)s, and for devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition; and transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair financial statements and to maintain accountability of assets.

In preparing the financial statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

The directors’ responsibilities include overseeing the Group’s financial reporting process.

Auditors’ responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SSAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.



As part of an audit in accordance with SSAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:

• Identifyandassesstherisksofmaterialmisstatementofthefinancialstatements,whetherduetofraudorerror,design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls.

• Obtainanunderstandingofinternalcontrolsrelevanttotheauditinordertodesignauditproceduresthatareappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal controls.

• Evaluatetheappropriatenessofaccountingpoliciesusedandthereasonablenessofaccountingestimatesandrelated disclosures made by management.

• Concludeontheappropriatenessofmanagement’suseofthegoingconcernbasisofaccountingand,basedonthe audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditors’ report. However, future events or conditions may cause the Group to cease to continue as a going concern.

• Evaluatetheoverallpresentation,structureandcontentofthefinancialstatements,includingthedisclosures,andwhether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtainsufficientappropriateauditevidenceregardingthefinancialinformationoftheentitiesorbusinessactivitieswithin the Group to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

We communicate with the directors regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide the directors with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with the directors, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditors’ report unless the law or regulations preclude public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

140 ST ENGINEERING


rePort on other legAl AnD regulAtorY requirements

In our opinion, the accounting and other records required by the Act to be kept by the Company and by those subsidiary corporations incorporated in Singapore of which we are the auditors have been properly kept in accordance with the provisions of the Act.

The engagement partner on the audit resulting in this independent auditors’ report is Quek Shu Ping.

KPmg llPPublic Accountants and Chartered Accountants

singapore20 February 2019


FINANCIAL StAtEMENtS

introDuction

This is the financial statements of Singapore Technologies Engineering Ltd (the Company) and its subsidiaries (collectively referred to as the Group) for the year ended 31 December 2018.

Over the past year, we have reviewed the content and structure of the financial report for opportunities to make them less complex and more relevant to users. This included:

• athoroughreviewofcontenttoeliminateimmaterialdisclosuresthatmayunderminetheusefulnessofthefinancialreport by obscuring important information; and

• reorganisationofthenotestothefinancialstatementsintosectionstoassistusersinunderstandingtheGroup’sperformance.

The purpose of these changes is to provide users with a clearer understanding of what drives financial performance and financial position of the Group and linkage to the Group’s strategy, whilst still complying with the provisions of the Singapore Companies Act and Singapore Financial Reporting Standards (International).

WhAt’s neW in this rePort

change in structure

Note to the financial statements are split into 7 distinct sections to enable a better understanding of how the Group has performed.

We have included an introduction at the start of each section to explain its purpose and content. Accounting policies, estimates and critical accounting judgements applied to the preparation of the financial statements have been moved to where the related accounting balance or financial statement matter is discussed and we have refined wording of the policies to allow them to be easily understood by users of this report.

Information is only being included in the financial report to the extent it is considered material and relevant to the understanding of the financial statements. A disclosure is considered material and relevant if:

• dollaramountissignificantinvalue• dollaramountissignificantbynature• financialresultscannotbeunderstoodwithoutspecificdisclosure• criticaltoallowusertounderstandsignificantchangesingroupbusinesses

142 ST ENGINEERING

CoNtENtS

consolidated income statement for the year ended 31 December 2018 144consolidated statement of comprehensive income for the year ended 31 December 2018 145consolidated balance sheet as at 31 December 2018 146consolidated statement of changes in equity for the year ended 31 December 2018 148consolidated statement of cash Flows for the year ended 31 December 2018 152

notes to the FinAnciAl stAtements

D I emPloYee beneFits 222-227

D1 Economic Value Added (EVA)-based Incentive Scheme

222

D2 Personnel expenses 223D3 Employee benefits 223D4 Share-based payment arrangements 226

e I cAPitAl structure AnD FinAncing

228-241

E1 Capital management 228E2 Finance costs, net 229E3 Investments 231E4 Borrowings 232E5 Commitments and

contingent liabilities237

E6 Share capital 238E7 Treasury shares 239E8 Capital reserves 239E9 Other reserves 240E10 Dividends 241

F I grouP structure 242-262

F1 Subsidiaries 242F2 Acquisition and disposal of controlling

interests in subsidiaries in 2018/2017244

F3 Non-controlling interests in subsidiaries

246

F4 Associates and joint ventures 248F5 Related party information 259F6 Parent entity disclosures 260

g I others 263-274

G1 New standards and interpretations not adopted

263

G2 Explanation of transition to SFRS(I) and adoption of new standards

264

A I About this rePort 154-155

b I business PerFormAnce 156-172

B1 Segment information 156B2 Revenue 160B3 Profit from operations 165B4 Other income, net 166B5 Earnings per share 167B6 Taxation 168

c I oPerAting Assets AnD liAbilities

173-221

C1 Property, plant and equipment 174C2 Intangible assets 182C3 Amounts due from related parties 189C4 Inventories 189C5 Trade receivables 190C6 Advances and other receivables 191C7 Bank balances and other liquid funds 191C8 Trade payables and accruals 192C9 Amounts due to related parties 192C10 Provisions 193C11 Deferred income 194C12 Contract balances 195C13 Financial risk management

objectives and policies196

C14 Classification and fair value of financial instruments

204

C15 Derivative financial instruments 215


The accompanying notes are an integral part of the financial statements.

CoNSoLIDAtED INCoME StAtEMENtFoR thE YEAR ENDED 31 DECEMBER 2018(CURRENCY - SINGAPoRE DoLLARS)

group note 2018$’000

2017$’000

revenue B2 6,697,928 6,521,063Cost of sales (5,292,389) (5,208,278)gross profit 1,405,539 1,312,785

Distribution and selling expenses (200,180) (169,488) Administrative expenses (509,874) (474,045) Other operating expenses (125,227) (126,404) Profit from operations B3 570,258 542,848

Other income 55,391 39,944Other expenses (20,405) (1,278)Other income, net B4 34,986 38,666

Finance income 22,357 38,650Finance costs (55,909) (57,682)Finance costs, net E2 (33,552) (19,032)

Share of results of associates and joint ventures, net of tax 49,056 49,332Profit before taxation 620,748 611,814

Taxation B6 (104,326) (85,721)Profit for the year 516,422 526,093

Attributable to:Shareholders of the Company 494,241 502,632Non-controlling interests F3 22,181 23,461

516,422 526,093

earnings per share (cents) B5 Basic 15.85 16.13 Diluted 15.76 16.05

144 ST ENGINEERING

CoNSoLIDAtED StAtEMENt oF CoMPREhENSIvE INCoMEFoR thE YEAR ENDED 31 DECEMBER 2018(CURRENCY - SINGAPoRE DoLLARS)



2017$’000

Profit for the year 516,422 526,093

other comprehensive incomeItems that will not be reclassified subsequently to profit or loss:Defined benefit plan remeasurements 201 (6,109)Equity investments at fair value through other comprehensive income (FVOCI)

– net change in fair value 80 –281 (6,109)

Items that are or may be reclassified subsequently to profit or loss:Net fair value changes on available-for-sale financial assets – 8,670Debt investments at FVOCI – reclassified to income statement (2,343) –Net fair value changes of cash flow hedges reclassified to income statement 2 1,598Effective portion of changes in fair value of cash flow hedges (35,110) 54,514Share of net fair value changes on cash flow hedges of joint ventures 505 (127)Foreign currency translation differences 302 (47,326)Share of foreign currency translation differences of

associates and joint ventures (213) (11,102)Reserves released on disposal of subsidiaries 13,714 2,161

(23,143) 8,388

other comprehensive (loss)/income for the year, net of tax (22,862) 2,279

total comprehensive income for the year, net of tax 493,560 528,372

total comprehensive income attributable to:Shareholders of the Company 482,888 492,980Non-controlling interests F3 10,672 35,392

493,560 528,372



CoNSoLIDAtED BALANCE ShEEtAS At 31 DECEMBER 2018(CURRENCY - SINGAPoRE DoLLARS)


2017$’000

1 January 2017$’000

Assets

non-current assetsProperty, plant and equipment C1 1,742,742 1,719,396 1,670,132Associates and joint ventures F4 455,703 448,387 405,530Investments E3 16,392 360,346 322,051Intangible assets C2 1,151,238 1,087,412 1,019,585Long-term trade receivables 1,172 – 1,894Deferred tax assets B6 72,136 74,028 92,528Amounts due from related parties C3 4,806 4,806 4,806Advances and other receivables C6 20,074 20,406 2,534Derivative financial instruments C15 11,483 33,082 32,967Employee benefits D3 – 243 151

3,475,746 3,748,106 3,552,178current assetsContract assets C12 1,070,396 939,073 968,608Inventories C4 1,183,510 1,082,356 1,067,365Trade receivables C5 1,137,816 940,725 1,063,514Amounts due from related parties C3 35,392 28,271 24,618Advances and other receivables C6 253,961 286,524 336,306Short-term investments E3 422 357 188,890Bank balances and other liquid funds C7 415,780 999,003 904,890

4,097,277 4,276,309 4,554,191

total assets 7,573,023 8,024,415 8,106,369

equitY AnD liAbilities

current liabilitiesContract liabilities C12 1,324,093 1,258,247 1,369,532Deposits from customers 4,219 5,809 10,990Trade payables and accruals C8 1,829,758 1,599,739 1,734,763Amounts due to related parties C9 85,445 104,042 28,390Provisions C10 212,935 260,146 280,766Provision for taxation 163,232 134,686 131,317Borrowings E4 225,416 221,642 87,427Deferred income C11 3,761 630 –Employee benefits D3 2,401 2,491 1,916

3,851,260 3,587,432 3,645,101

net current assets 246,017 688,877 909,090

146 ST ENGINEERING

CoNSoLIDAtED BALANCE ShEEtAS At 31 DECEMBER 2018(CURRENCY - SINGAPoRE DoLLARS)



2017$’000

1 January 2017$’000

non-current liabilitiesContract liabilities C12 495,453 521,787 505,492Trade payables and accruals C8 80,345 131,843 137,763Amounts due to related parties C9 – 17 17Deferred tax liabilities B6 170,726 205,200 216,592Borrowings E4 270,363 894,422 992,848Deferred income C11 42,405 69,156 75,445Employee benefits D3 108,016 102,669 85,200Derivative financial instruments C15 19,842 15,553 19,435

1,187,150 1,940,647 2,032,792

total liabilities 5,038,410 5,528,079 5,677,893

net assets 2,534,613 2,496,336 2,428,476

share capital and reservesShare capital E6 895,926 895,926 895,926Treasury shares E7 (9,030) (22,870) (44,081)Capital reserves E8 118,174 119,782 113,184Other reserves E9 (72,054) (67,480) (56,666)Retained earnings 1,313,361 1,289,653 1,258,179equity attributable to owners of the company 2,246,377 2,215,011 2,166,542Non-controlling interests F3 288,236 281,325 261,934

2,534,613 2,496,336 2,428,476

total equity and liabilities 7,573,023 8,024,415 8,106,369



CoNSoLIDAtED StAtEMENt oF ChANGES IN EqUItYFoR thE YEAR ENDED 31 DECEMBER 2018(CURRENCY - SINGAPoRE DoLLARS)

group noteshare

capital$’000

treasury shares$’000

capital reserves

$’000

otherreserves

$’000

retained earnings

$’000total$’000

non-controllinginterests

$’000

totalequity$’000

At 1 January 2017 G2 895,926 (44,081) 113,184 (56,666) 1,258,179 2,166,542 261,934 2,428,476

total comprehensive income for the yearProfit for the year – – – – 502,632 502,632 23,461 526,093

Other comprehensive incomeNet fair value changes on available-for-sale financial assets – – – 8,670 – 8,670 – 8,670Net fair value changes on cash flow hedges reclassified to income

statement – – – 1,598 – 1,598 – 1,598Effective portion of changes in fair value of cash flow hedges – – – 40,521 – 40,521 13,993 54,514Share of net fair value changes on cash flow hedges of joint ventures – – – (127) – (127) – (127)Foreign currency translation differences – – – (47,929) – (47,929) 603 (47,326)Share of foreign currency translation differences of associates

and joint ventures – – – (11,102) – (11,102) – (11,102)Reserves released on disposal of subsidiaries – – – 2,144 – 2,144 17 2,161Defined benefit plan remeasurements – – – – (3,427) (3,427) (2,682) (6,109)

Other comprehensive income for the year, net of tax – – – (6,225) (3,427) (9,652) 11,931 2,279

Total comprehensive income for the year, net of tax – – – (6,225) 499,205 492,980 35,392 528,372

transactions with owners of the company, recognised directly in equityContributions by and distributions to owners of the CompanyCapital contribution by non-controlling interests – – – – – – 397 397Return of capital to non-controlling interests – – – – – – (43) (43)Cost of share-based payment – – – 14,509 – 14,509 52 14,561Purchase of treasury shares E7 – (15,748) – – – (15,748) – (15,748)Treasury shares reissued pursuant to share plans – 36,959 6,598 (18,599) – 24,958 (42) 24,916Dividends paid E10 – – – – (467,641) (467,641) – (467,641)Dividends paid to non-controlling interests – – – – – – (16,615) (16,615)Total contributions by and distributions to owners of the Company – 21,211 6,598 (4,090) (467,641) (443,922) (16,251) (460,173)

Changes in ownership interests in subsidiariesAcquisition of non-controlling interests in a subsidiary without

a change in control – – – (589) – (589) 250 (339)Total transactions with owners of the Company – 21,211 6,598 (4,679) (467,641) (444,511) (16,001) (460,512)Transfer from retained earnings to statutory reserve – – – 90 (90) – – –At 31 December 2017 G2 895,926 (22,870) 119,782 (67,480) 1,289,653 2,215,011 281,325 2,496,336

148 ST ENGINEERING


group noteshare

capital$’000


capital reserves

$’000

otherreserves

$’000

retained earnings

$’000total$’000


$’000

totalequity$’000

At 1 January 2017 G2 895,926 (44,081) 113,184 (56,666) 1,258,179 2,166,542 261,934 2,428,476


Other comprehensive incomeNet fair value changes on available-for-sale financial assets – – – 8,670 – 8,670 – 8,670Net fair value changes on cash flow hedges reclassified to income

statement – – – 1,598 – 1,598 – 1,598Effective portion of changes in fair value of cash flow hedges – – – 40,521 – 40,521 13,993 54,514Share of net fair value changes on cash flow hedges of joint ventures – – – (127) – (127) – (127)Foreign currency translation differences – – – (47,929) – (47,929) 603 (47,326)Share of foreign currency translation differences of associates

and joint ventures – – – (11,102) – (11,102) – (11,102)Reserves released on disposal of subsidiaries – – – 2,144 – 2,144 17 2,161Defined benefit plan remeasurements – – – – (3,427) (3,427) (2,682) (6,109)

Other comprehensive income for the year, net of tax – – – (6,225) (3,427) (9,652) 11,931 2,279


transactions with owners of the company, recognised directly in equityContributions by and distributions to owners of the CompanyCapital contribution by non-controlling interests – – – – – – 397 397Return of capital to non-controlling interests – – – – – – (43) (43)Cost of share-based payment – – – 14,509 – 14,509 52 14,561Purchase of treasury shares E7 – (15,748) – – – (15,748) – (15,748)Treasury shares reissued pursuant to share plans – 36,959 6,598 (18,599) – 24,958 (42) 24,916Dividends paid E10 – – – – (467,641) (467,641) – (467,641)Dividends paid to non-controlling interests – – – – – – (16,615) (16,615)Total contributions by and distributions to owners of the Company – 21,211 6,598 (4,090) (467,641) (443,922) (16,251) (460,173)

Changes in ownership interests in subsidiariesAcquisition of non-controlling interests in a subsidiary without

a change in control – – – (589) – (589) 250 (339)Total transactions with owners of the Company – 21,211 6,598 (4,679) (467,641) (444,511) (16,001) (460,512)Transfer from retained earnings to statutory reserve – – – 90 (90) – – –At 31 December 2017 G2 895,926 (22,870) 119,782 (67,480) 1,289,653 2,215,011 281,325 2,496,336




group noteshare

capital$’000


capital reserves

$’000

otherreserves

$’000

retained earnings

$’000total$’000


$’000

totalequity$’000

At 1 January 2018 895,926 (22,870) 119,782 (67,480) 1,289,653 2,215,011 281,325 2,496,336Adjustment on initial application of SFRS(I) 9, net of tax G2 – – – – (3,597) (3,597) (609) (4,206)Adjusted balance at 1 January 2018 895,926 (22,870) 119,782 (67,480) 1,286,056 2,211,414 280,716 2,492,130


Other comprehensive incomeEquity investments at FVOCI – net change in fair value – – – 52 28 80 – 80Reclassified to income statement – Debt investments at FVOCI – – – (2,343) – (2,343) – (2,343) – Net fair value changes on cash flow hedges – – – 2 – 2 – 2Effective portion of changes in fair value of cash flow hedges – – – (25,294) – (25,294) (9,816) (35,110)Share of net fair value changes on cash flow hedges of joint ventures – – – 505 – 505 – 505Foreign currency translation differences – – – 2,030 – 2,030 (1,728) 302Share of foreign currency translation differences of associates

and joint ventures – – – (213) – (213) – (213)Reserves released on disposal of subsidiaries – – – 13,714 – 13,714 – 13,714Defined benefit plan remeasurements – – – – 166 166 35 201Other comprehensive loss for the year, net of tax – – – (11,547) 194 (11,353) (11,509) (22,862)


Hedging gains and losses and costs of hedging transferred to the cost of inventory – – – 3,955 – 3,955 – 3,955

transactions with owners of the company, recognised directly in equityContributions by and distributions to owners of the CompanyCapital contribution by non-controlling interests – – – – – – 432 432Cost of share-based payment – – – 20,415 – 20,415 75 20,490Purchase of treasury shares E7 – (4,354) – – – (4,354) – (4,354)Treasury shares reissued pursuant to share plans – 18,194 (1,608) (16,523) – 63 (64) (1)Dividends paid E10 – – – – (468,004) (468,004) – (468,004)Dividends paid to non-controlling interests – – – – – – (3,595) (3,595)Total contributions by and distributions to owners of the Company – 13,840 (1,608) 3,892 (468,004) (451,880) (3,152) (455,032)

Transfer from retained earnings to statutory reserve – – – (874) 874 – – –

Balance at 31 December 2018 895,926 (9,030) 118,174 (72,054) 1,313,361 2,246,377 288,236 2,534,613

150 ST ENGINEERING


group noteshare

capital$’000


capital reserves

$’000

otherreserves

$’000

retained earnings

$’000total$’000


$’000

totalequity$’000

At 1 January 2018 895,926 (22,870) 119,782 (67,480) 1,289,653 2,215,011 281,325 2,496,336Adjustment on initial application of SFRS(I) 9, net of tax G2 – – – – (3,597) (3,597) (609) (4,206)Adjusted balance at 1 January 2018 895,926 (22,870) 119,782 (67,480) 1,286,056 2,211,414 280,716 2,492,130


Other comprehensive incomeEquity investments at FVOCI – net change in fair value – – – 52 28 80 – 80Reclassified to income statement – Debt investments at FVOCI – – – (2,343) – (2,343) – (2,343) – Net fair value changes on cash flow hedges – – – 2 – 2 – 2Effective portion of changes in fair value of cash flow hedges – – – (25,294) – (25,294) (9,816) (35,110)Share of net fair value changes on cash flow hedges of joint ventures – – – 505 – 505 – 505Foreign currency translation differences – – – 2,030 – 2,030 (1,728) 302Share of foreign currency translation differences of associates

and joint ventures – – – (213) – (213) – (213)Reserves released on disposal of subsidiaries – – – 13,714 – 13,714 – 13,714Defined benefit plan remeasurements – – – – 166 166 35 201Other comprehensive loss for the year, net of tax – – – (11,547) 194 (11,353) (11,509) (22,862)


Hedging gains and losses and costs of hedging transferred to the cost of inventory – – – 3,955 – 3,955 – 3,955

transactions with owners of the company, recognised directly in equityContributions by and distributions to owners of the CompanyCapital contribution by non-controlling interests – – – – – – 432 432Cost of share-based payment – – – 20,415 – 20,415 75 20,490Purchase of treasury shares E7 – (4,354) – – – (4,354) – (4,354)Treasury shares reissued pursuant to share plans – 18,194 (1,608) (16,523) – 63 (64) (1)Dividends paid E10 – – – – (468,004) (468,004) – (468,004)Dividends paid to non-controlling interests – – – – – – (3,595) (3,595)Total contributions by and distributions to owners of the Company – 13,840 (1,608) 3,892 (468,004) (451,880) (3,152) (455,032)

Transfer from retained earnings to statutory reserve – – – (874) 874 – – –

Balance at 31 December 2018 895,926 (9,030) 118,174 (72,054) 1,313,361 2,246,377 288,236 2,534,613



CoNSoLIDAtED StAtEMENt oF CASh FLowSFoR thE YEAR ENDED 31 DECEMBER 2018(CURRENCY - SINGAPoRE DoLLARS)

Cash and cash equivalents comprise cash balances and fixed deposits. Cash equivalents are short-term and highly liquid investments that are readily convertible to known amounts of cash and that are subject to insignificant risk of changes in value.

group 2018$’000

2017$’000

cash flows from operating activitiesProfit before taxation 620,748 611,814Adjustments: Share of results of associates and joint ventures, net of tax (49,056) (49,332) Share-based payment expense 20,490 14,561 Depreciation charge 194,714 183,616 Property, plant and equipment written off 982 431 Amortisation of other intangible assets 49,331 33,343 Gain on disposal of property, plant and equipment (2,000) (241) Gain on disposal of intangible assets (41) – Loss/(gain) on disposal of investments, net 5,173 (540) (Gain)/loss on disposal of associates (12,426) 1 Loss on disposal of subsidiaries 20,081 1,277 Changes in fair value of financial instruments and hedged items 5,280 13,166 Interest expense 44,900 42,609 Interest income (17,906) (24,618) Impairment of property, plant and equipment 81 63 Impairment of goodwill and other intangible assets 1,861 11 Impairment of investments – 447 Dividends from investments – (7) Amortisation of deferred income (144) (61)operating profit before working capital changes 882,068 826,540Changes in: Inventories (60,784) (28,157) Contract assets (134,319) 10,877 Trade receivables (200,106) 113,169 Advance payments to suppliers 20,616 42,042 Other receivables, deposits and prepayments (11,903) (140) Amounts due from holding company and related corporations balances 9,474 (9,286) Amounts due to holding company and related corporations balances 1,677 230 Amounts due from associates (431) 9,077 Amounts due from joint ventures (3,777) 55,122 Contract liabilities 36,026 (82,006) Trade payables 163,941 (117,424) Deposits from customers (1,590) (5,967) Other payables, accruals and provisions 28,604 21,074 Loans to staff and third parties 542 – Deferred income (11,459) (7,942) Foreign currency translation of foreign operations (2,435) 1,171cash generated from operations 716,144 828,380Interest received 22,510 26,948Income tax paid (99,161) (91,666)net cash from operating activities 639,493 763,662

152 ST ENGINEERING


CoNSoLIDAtED StAtEMENt oF CASh FLowSFoR thE YEAR ENDED 31 DECEMBER 2018(CURRENCY - SINGAPoRE DoLLARS)


2017$’000

cash flows from investing activitiesProceeds from sale of property, plant and equipment 4,097 1,994Proceeds from disposal of associates and return of capital from a joint venture 27,682 –Proceeds from sale and maturity of investments 375,098 315,838Proceeds from unwinding of cross currency interest rate swaps 13,210 –Proceeds from sale of intangible assets 64 –Dividends from associates and joint ventures 61,081 81,029Dividends from investments – 7Purchase of property, plant and equipment (336,102) (272,561)Purchase of investments (40,920) (171,433)Investments in associates and joint ventures (34,305) (85,784)Loan to a joint venture (19,806) –Additions to other intangible assets (115,408) (73,271)Acquisition of controlling interests in subsidiaries, net of cash acquired – (50,005)Disposal of subsidiaries, net of cash disposed 138 8,324net cash used in investing activities (65,171) (245,862)

cash flows from financing activitiesProceeds from bank loans 307,901 171,412Proceeds from loan from non-controlling interests of a subsidiary – 5,152Proceeds of a loan from a joint venture 17,925 36,463Repayment of bank loans (247,134) (65,702)Repayment of other loans (148) (137)Repayment of lease obligations (2,513) (784)Repayment of loan to a joint venture (30,805) (19,607)Redemption of medium term notes (681,100) –Proceeds from share options exercised with issuance of treasury shares – 24,916Purchase of treasury shares (4,354) (15,748)Capital contribution from non-controlling interests of subsidiaries 432 397Return of capital to non-controlling interests of a subsidiary – (43)Acquisition of non-controlling interests in a subsidiary – (223)Dividends paid to shareholders of the Company (468,004) (467,641)Dividends paid to non-controlling interests (4,200) (16,010)Interest paid (49,416) (41,824)Deposits discharged/(pledged) 9 (131)net cash used in financing activities (1,161,407) (389,510)

net (decrease)/increase in cash and cash equivalents (587,085) 128,290Cash and cash equivalents at beginning of the year 997,614 903,632Exchange difference on cash and cash equivalents at beginning of the year 3,871 (34,308)cash and cash equivalents at end of the year C7 414,400 997,614


NotES to thEFINANCIAL StAtEMENtS31 DECEMBER 2018(CURRENCY – SINGAPoRE DoLLARS UNLESS othERwISE StAtED)

A I About this rePort

general

The Company is a public limited company domiciled and incorporated in Singapore. The address of the Company’s registered office and principal place of business is 1 Ang Mo Kio Electronics Park Road #07-01 ST Engineering Hub, Singapore 567710.

The Company’s immediate and ultimate holding company is Temasek Holdings (Private) Limited, a company incorporated in Singapore.

The consolidated financial statements of Singapore Technologies Engineering Ltd and its subsidiaries (collectively referred to as the Group) as at 31 December 2018 and for the year then ended were authorised and approved by the Board of Directors for issuance on 20 February 2019.

basis of preparation

The financial statements are prepared in accordance with Singapore Financial Reporting Standards (International) (SFRS(I)). These are the Group’s first financial statements prepared in accordance with SFRS(I) and SFRS(I) 1 First-time Adoption of Singapore Financial Reporting Standards (International) has been applied.

In the previous financial years, the financial statements were prepared in accordance with Financial Reporting Standards in Singapore (FRS). An explanation of how the transition to SFRS(I) and application of SFRS(I) 9 and SFRS(I) 15 have affected the reported financial position, financial performance and cash flows is provided in note G2.

The financial statements have been prepared on the historical cost convention, except as otherwise described in the accounting policies below.

The financial statements are presented in Singapore dollars (SGD) which is the Company’s functional currency. All values are rounded to the nearest thousand ($’000) unless otherwise indicated.

significant accounting policies

The accounting policies have been applied consistently by Group entities to all periods presented in these financial statements and in preparing the opening SFRS(I) balance sheet as at 1 January 2017 for the purposes of the transition to SFRS(I), unless otherwise indicated.

154 ST ENGINEERING


Foreign currency

The major functional currencies of the Group entities are the Singapore dollar (SGD), the United States dollar (USD) and the Euro.

Transactions, assets and liabilities denominated in foreign currencies are translated into SGD at reporting date using the following applicable exchange rates:

Foreign currency amount Applicable exchange rate

Transactions Date of transaction

Monetary assets and liabilities Reporting date

Non-monetary assets and liabilities carried at fair value Date fair value is determined

Non-monetary assets and liabilities carried at cost Date of transaction

Foreign exchange gains and losses resulting from translation of monetary assets and liabilities are recognised in the income statement, except for qualifying cash flow hedges, which are recognised in other comprehensive income (OCI).

On consolidation the assets, liabilities, income and expenses of foreign operations are translated into SGD using the following applicable exchange rates:

Foreign currency amount Applicable exchange rate

Income and expenses Average exchange rate

Assets and liabilities Reporting date

Equity Historical date

Foreign exchange differences resulting from translation of foreign operations are initially recognised in the foreign currency translation reserve and subsequently transferred to profit or loss on disposal of the foreign operation.



b I business PerFormAnce

The highlights of the Group’s financial performance during the financial year are:• Revenueof$6.7billion,up3%• Otherincome,netof$35.0million,down10%• Profitbeforetaxof$620.7million,up1%• Profitattributabletoshareholdersof$494.2million,down2%• Earningspershareof15.85centspershare,down2%

b1 Segment information b4 Other income, net

b2 Revenue b5 Earnings per share

b3 Profit from operations b6 Taxation

b1 segment information

The principal activities of the Company are those of an investment holding company and the provision of engineering and related services.

The Group is organised on a worldwide basis into four major operating segments. Management reviews the segments’ operating results regularly in order to allocate resources to the segments and to assess the segments’ performance.

The principal activities of these operating segments are outlined below:

segments Principal activities

Aerospace Provides a wide spectrum of aircraft maintenance, engineering and training services for both military and commercial aircraft operators. These services include airframe, component and engine maintenance, repair and overhaul, aircraft design engineering and parts manufacturing, aviation materials, asset management and pilot training.

Electronics Specialises in the design, development and delivery of information communications technologies (ICT) products, solutions and services for Smart Cities connectivity, mobility and security.

Land Systems Delivers customised land systems, security solutions and their related through-life support for defence, homeland security and commercial applications.

Marine Provides turnkey and sustainable defence and commercial solutions to the marine, offshore and environmental engineering industries.

Others* Research and development, provision of engineering products and solutions, treasury, investment holding and provision of management, consultancy and other support services.

* None of these segments meets any of the quantitative thresholds for determining reportable segments in financial years 2018 and 2017.

156 ST ENGINEERING


b1 segment information (continued)

Segment performance is evaluated based on operating profit or loss which in certain respects, as explained in the table below, is measured differently from operating profit or loss in the consolidated financial statements.

Inter-segment pricing is based on terms negotiated between the parties which are intended to reflect competitive terms.

Aerospace$’000

electronics$’000

landsystems

$’000marine

$’000others

$’000elimination

$’000group$’000

2018

Revenue External sales 2,646,992 2,143,415 1,282,022 574,084 51,415 – 6,697,928 Inter-segment sales 7,127 23,118 20,787 270 4,244 (55,546) –

2,654,119 2,166,533 1,302,809 574,354 55,659 (55,546) 6,697,928

Reportable segment profit from operations 268,148 220,774 59,076 44,375 (22,115) – 570,258

Other income 30,380 15,718 12,775 6,809 1,800 (12,091) 55,391 Other expenses (13,281) (53) (12,071) (276) (81) 5,357 (20,405) Finance income 8,773 2,533 1,375 3,072 6,604 – 22,357 Finance costs (14,773) (9,375) (6,290) (4,275) (21,196) – (55,909) Share of results of

associates and joint ventures, net of tax 40,748 (4,905) 7,396 555 5,262 – 49,056

Profit before taxation 319,995 224,692 62,261 50,260 (29,726) (6,734) 620,748 Taxation (54,644) (37,419) (8,726) (5,059) 1,522 – (104,326) Non-controlling

interests (20,724) (782) (675) – – – (22,181) Profit attributable

to shareholders 244,627 186,491 52,860 45,201 (28,204) (6,734) 494,241

Other assets 3,104,811 2,174,291 1,626,420 800,078 4,191,077 (4,779,357) 7,117,320 Associates and

joint ventures 248,906 62,749 92,206 4,099 47,743 – 455,703 Segment assets 3,353,717 2,237,040 1,718,626 804,177 4,238,820 (4,779,357) 7,573,023

Segment liabilities 2,394,681 1,909,405 1,339,760 761,596 1,954,163 (3,321,195) 5,038,410

Capital expenditure 299,766 88,857 37,879 10,309 13,367 – 450,178Depreciation and

amortisation 113,015 56,519 37,993 29,985 6,575 (42) 244,045 (Write-back of)/

impairment losses (11) – 1,953 – – – 1,942Other non-cash

expenses 847 38 43 – 54 – 982




Aerospace$’000

electronics$’000

landsystems

$’000marine

$’000others

$’000elimination

$’000group$’000

2017

Revenue External sales 2,534,923 2,010,985 1,243,511 637,444 94,200 – 6,521,063 Inter-segment sales 11,990 30,469 19,148 87 6,021 (67,715) –

2,546,913 2,041,454 1,262,659 637,531 100,221 (67,715) 6,521,063

Reportable segment profit from operations 272,267 194,846 70,231 14,795 (9,291) – 542,848

Other income 13,793 14,911 11,230 7,122 5,241 (12,353) 39,944Other expenses (5,261) (66) (1,766) (109) (1) 5,925 (1,278)Finance income 8,489 1,778 935 2,690 24,758 – 38,650Finance costs (11,994) (8,989) (6,820) (3,196) (26,683) – (57,682)Share of results of

associates and joint ventures, net of tax 41,171 (2,282) 11,229 1,106 (1,892) – 49,332

Profit before taxation 318,465 200,198 85,039 22,408 (7,868) (6,428) 611,814Taxation (51,453) (31,433) 3,677 4,641 (11,153) – (85,721)Non-controlling

interests (22,172) 7 (1,296) – – – (23,461)Profit attributable

to shareholders 244,840 168,772 87,420 27,049 (19,021) (6,428) 502,632

Other assets 2,832,624 1,901,177 1,531,139 892,304 4,941,237 (4,522,453) 7,576,028Associates and

joint ventures 248,168 54,523 108,233 10,493 26,970 – 448,387Segment assets 3,080,792 1,955,700 1,639,372 902,797 4,968,207 (4,522,453) 8,024,415

Segment liabilities 2,121,057 1,666,909 1,315,362 783,949 2,753,370 (3,112,568) 5,528,079

Capital expenditure 170,519 83,678 33,137 44,176 14,435 – 345,945Depreciation and

amortisation 103,537 47,810 32,503 28,875 4,276 (42) 216,959Impairment losses 11 – 314 – 196 – 521Other non-cash

expenses 188 141 102 – – – 431

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Analysis by country of incorporation

Revenue is based on the country of incorporation regardless of where the goods are produced or services rendered. Non-current assets, excluding derivative financial instruments, employee benefits and deferred tax assets, are based on the location of those assets.

revenue non-current assets

2018$’000

2017$’000

2018$’000

2017$’000

Asia 4,884,431 4,692,400 1,622,510 2,079,542USA 1,198,872 1,219,072 921,086 907,205Europe 540,575 552,621 752,059 559,755Others 74,050 56,970 96,472 94,251

6,697,928 6,521,063 3,392,127 3,640,753

For the year ended 31 December 2018:

• Within Europe, revenueof approximately $453,695,000 (2017: $462,268,000)were from subsidiaries located in Germany.

• WithinAsia,mostoftherevenuewerefromsubsidiarieslocatedinSingapore.• TheremainingrevenuefromcustomersinAsia,EuropeandOtherswereindividuallyinsignificant.

As at 31 December 2018:

• WithinEurope,non-current assetsof approximately $585,913,000 (2017: $500,634,000)were located in Germany.

• WithinAsia,mostofthenon-currentassetswerefromsubsidiarieslocatedinSingapore.• Theremainingnon-currentassetslocatedinAsia,EuropeandOtherswereindividuallyinsignificant.



b2 revenue

Disaggregation of revenue

In the following table, revenue is disaggregated by primary geographical market, major products/service lines and timing of revenue recognition. The table also includes a reconciliation of the disaggregated revenue with the Group’s reportable segments.

Aerospace$’000

electronics$’000

land systems$’000

marine$’000

others$’000

elimination$’000

group$’000

2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017

Primary geographical marketsAsia 1,234,221 1,193,473 1,706,868 1,649,721 857,638 777,321 403,557 435,197 10,055 15,590 (54,628) (66,639) 4,157,711 4,004,663USA 631,501 564,067 178,870 176,901 360,016 378,352 111,125 158,979 43,914 82,499 (918) (1,076) 1,324,508 1,359,722Europe 558,029 566,046 131,707 92,173 8,378 7,078 47,115 22,733 1,624 1,233 – – 746,853 689,263Others 230,368 223,327 149,088 122,659 76,777 99,908 12,557 20,622 66 899 – – 468,856 467,415

2,654,119 2,546,913 2,166,533 2,041,454 1,302,809 1,262,659 574,354 637,531 55,659 100,221 (55,546) (67,715) 6,697,928 6,521,063

major products/service linesSale of goods 501,138 452,298 464,852 408,911 879,513 857,058 5,897 5,957 50,988 98,794 (3,305) (8,541) 1,899,083 1,814,477Service income 202,646 237,532 606,574 584,862 384,124 365,233 275,399 299,615 4,190 1,145 (33,774) (31,702) 1,439,159 1,456,685Contract revenue 1,950,335 1,857,083 1,095,107 1,047,681 39,172 40,368 293,058 331,959 481 282 (18,467) (27,472) 3,359,686 3,249,901

2,654,119 2,546,913 2,166,533 2,041,454 1,302,809 1,262,659 574,354 637,531 55,659 100,221 (55,546) (67,715) 6,697,928 6,521,063

timing of revenue recognitionTransferred at a point in time 841,649 973,288 849,672 803,287 1,008,858 1,038,777 5,897 5,957 50,809 87,961 (15,749) (17,302) 2,741,136 2,891,968Transferred over time 1,812,470 1,573,625 1,316,861 1,238,167 293,951 223,882 568,457 631,574 4,850 12,260 (39,797) (50,413) 3,956,792 3,629,095

2,654,119 2,546,913 2,166,533 2,041,454 1,302,809 1,262,659 574,354 637,531 55,659 100,221 (55,546) (67,715) 6,697,928 6,521,063

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b2 revenue

Disaggregation of revenue

In the following table, revenue is disaggregated by primary geographical market, major products/service lines and timing of revenue recognition. The table also includes a reconciliation of the disaggregated revenue with the Group’s reportable segments.

Aerospace$’000

electronics$’000

land systems$’000

marine$’000

others$’000

elimination$’000

group$’000

2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017

Primary geographical marketsAsia 1,234,221 1,193,473 1,706,868 1,649,721 857,638 777,321 403,557 435,197 10,055 15,590 (54,628) (66,639) 4,157,711 4,004,663USA 631,501 564,067 178,870 176,901 360,016 378,352 111,125 158,979 43,914 82,499 (918) (1,076) 1,324,508 1,359,722Europe 558,029 566,046 131,707 92,173 8,378 7,078 47,115 22,733 1,624 1,233 – – 746,853 689,263Others 230,368 223,327 149,088 122,659 76,777 99,908 12,557 20,622 66 899 – – 468,856 467,415

2,654,119 2,546,913 2,166,533 2,041,454 1,302,809 1,262,659 574,354 637,531 55,659 100,221 (55,546) (67,715) 6,697,928 6,521,063

major products/service linesSale of goods 501,138 452,298 464,852 408,911 879,513 857,058 5,897 5,957 50,988 98,794 (3,305) (8,541) 1,899,083 1,814,477Service income 202,646 237,532 606,574 584,862 384,124 365,233 275,399 299,615 4,190 1,145 (33,774) (31,702) 1,439,159 1,456,685Contract revenue 1,950,335 1,857,083 1,095,107 1,047,681 39,172 40,368 293,058 331,959 481 282 (18,467) (27,472) 3,359,686 3,249,901

2,654,119 2,546,913 2,166,533 2,041,454 1,302,809 1,262,659 574,354 637,531 55,659 100,221 (55,546) (67,715) 6,697,928 6,521,063

timing of revenue recognitionTransferred at a point in time 841,649 973,288 849,672 803,287 1,008,858 1,038,777 5,897 5,957 50,809 87,961 (15,749) (17,302) 2,741,136 2,891,968Transferred over time 1,812,470 1,573,625 1,316,861 1,238,167 293,951 223,882 568,457 631,574 4,850 12,260 (39,797) (50,413) 3,956,792 3,629,095

2,654,119 2,546,913 2,166,533 2,041,454 1,302,809 1,262,659 574,354 637,531 55,659 100,221 (55,546) (67,715) 6,697,928 6,521,063



revenue from contracts with customers

Revenue is measured based on the consideration specified in a contract with a customer. The Group recognises revenue when it transfers control over a good or service to a customer.

The following provides information about the nature and timing of the satisfaction of performance obligations in contracts with customers, including significant payment terms, and the related revenue recognition policies.

(a) Revenue from sale of goods

Revenue is recognised when goods are delivered to the customer and the criteria for acceptance have been satisfied. Where applicable, a portion of the contract consideration is received in advance from our customers and the remaining consideration is received after delivery. Where payment terms are for reasons of financing, a financing component is recognised on the sale of goods.

(b) Revenue from services rendered

Revenue from services rendered are recognised as performance obligations are satisfied. Payments are due from customers based on the agreed billing milestone stipulated in the contracts or based on the amounts certified by the customers.

Where performance obligations are satisfied over time as work progresses, revenue is recognised progressively based on the percentage of completion method. The stage of completion is assessed by reference to assessment of work performed (output method) or the cost incurred relative to total estimated costs (input method) depending on which method commensurates with the pattern of transfer of control to the customer. The related costs are recognised in profit or loss when they are incurred, unless they relate to future performance obligations.

If the value of services rendered for the contract exceeds payments received from the customer, a contract asset is recognised and presented separately on the balance sheet. The contract assets are transferred to receivables when the entitlement to payment becomes unconditional. If the amounts invoiced to the customer exceeds the value of services rendered, a contract liability is recognised and separately presented on the balance sheet.

(c) Revenue from long-term contracts

The Group builds specialised assets customised to customers’ order for which the Group does not have an alternative use. These contracts can span several years.

b2 revenue (continued)

162 ST ENGINEERING


revenue from contracts with customers (continued)

(c) Revenue from long-term contracts (continued)

(i) Contracts with enforceable right to payment

The Group has determined that for contracts where the Group has an enforceable right to payment, the customer controls all of the work-in-progress. This is because under those contracts, the assets are at the customer’s specification and the Group is entitled to reimbursement of costs incurred to date, including a reasonable margin when the contract is terminated by the customer. Progress billings to the customer are based on a payment schedule in the contract that is dependent on the achievement of specified milestones.

Revenue is recognised over time. The stage of completion is typically assessed by reference to either surveys of work performed (output method) or the cost incurred relative to total estimated costs (input method) depending on which method commensurates with the pattern of transfer of control to the customer.

(ii) Contracts without enforceable right to payment

For contracts where the Group does not have an enforceable right to payment, customers do not take control of the specialised asset until they are completed. At the inception of the contract, the customers usually make an advance payment that is not refundable if the contract is cancelled. The advance payment is presented as a contract liability. The rest of the consideration is only billed upon acceptance by the customer.

Revenue is recognised at a point in time when the assets are completed and have been accepted by customers.

When the period between the satisfaction of a performance obligation and payment by the customer exceeds a year, the Group adjusts the transaction price with its customer and recognises a financing component. In adjusting for financing component, the Group uses a discount rate that would be reflected separately as a financing income from contract inception.

For contracts with variable consideration (i.e. liquidated damages, bonus and penalty adjustments), revenue is recognised to the extent that it is highly probable that a reversal of previously recognised revenue will not occur. Therefore, the amount of revenue recognised is adjusted for possibility of delays to the projects and ability to meet key performance indicators stipulated in the contract. The Group reviews the progress of the projects at each reporting date and updates the transaction price accordingly.

The Group accounts for modifications to the scope or price of a contract as separate contracts if the modification adds distinct goods or services at their stand-alone selling prices. For contract modifications that add distinct goods or services but not at their stand-alone selling prices, the Group combines the remaining consideration in the original contract with the consideration promised in the modification to create a new transaction price that is then allocated to all remaining performance obligations to be satisfied. For contract modifications that do not add distinct goods or services, the Group accounts for the modification as a continuation of the original contract and recognises as a cumulative adjustment to revenue at the date of modification.




revenue from contracts with customers (continued)

Key estimate and judgement: revenue recognition

Significant judgement is applied in determining:

• whetherperformanceobligationsaredistinct.

Requires an assessment of whether the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer and if the promise is separately identifiable from other promises in the contract.

• the transaction price for contracts with variable consideration (e.g. bonus, liquidated damages, penalties, etc).

Requires an evaluation of potential risk and factors which may affect completion or delivery of the contract, in accordance with contract obligations.

• estimatedcosttocomplete.

For revenue recognised over time, the percentage of completion is assessed by reference to the contract costs incurred till date in proportion to the total estimated costs for each contract. In making the estimates, management relies on the expertise of its project team and past experience of completed projects. The estimated total costs is reviewed regularly and adjusted where necessary, with the corresponding effect of the change being recognised prospectively from the date of change.


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b3 Profit from operations

Profit from operations is arrived after charging/(crediting) the following items (excluding those disclosed in the other notes to the financial statements):

group 2018$’000

2017$’000

After charging/(crediting)Auditors’ remuneration- auditors of the Company 3,791 2,913- other auditors # 1,678 3,039Non-audit fees- auditors of the Company 698 990- other auditors # 1,736 1,012Fees paid to auditors of the Company under business relationship arrangement – 626Fees paid to a firm of which a director is a member 711 606Allowance for inventory obsolescence 56,432 35,012Impairment loss on trade receivables and contract assets 7,405 15,515(Write-back of)/provision for onerous contracts (1,290) 16,887Property, plant and equipment written off 982 431Research, design and development expenses 106,069 117,470Operating lease expenses 45,713 47,041

# Refers to other member firms of KPMG International



b4 other income, net

group 2018$’000

2017$’000

other incomeGovernment grants 18,577 14,089Rental income 4,682 6,525Gain on disposal of property, plant and equipment 2,000 241Gain on disposal of associates 12,750 –Grant income from Wage Credit Scheme 8,549 6,955Others 8,833 12,134

55,391 39,944

other expensesLoss on disposal of subsidiaries (20,081) (1,277)Loss on disposal of an associate and a joint venture (324) (1)

(20,405) (1,278)

Other income, net, recognised in profit or loss 34,986 38,666

recognition and measurement

(i) Government grants are recognised when the conditions associated with the grants are complied with.

Grants that compensate the Group for expenses incurred are recognised in profit or loss in the same periods in which the expenses are recognised.

Grants relating to depreciable assets are recognised in profit or loss over the estimated useful lives of the relevant assets.

(ii) Rental income from leasing facilities is accounted on a straight-line basis over the lease term.

(iii) The gain or loss on disposal of an item of property, plant and equipment, subsidiary, associate or joint venture is determined by comparing the proceeds from disposal with the carrying amount of the disposed item.

166 ST ENGINEERING


b5 earnings per share

basic earnings per share

The weighted average number of ordinary shares used in the calculation of earnings per share is arrived at as follows:

group 2018$’000

2017$’000

number of sharesIssued ordinary shares at beginning of the year 3,115,722 3,108,606Effect of share options exercised, performance shares and

restricted shares released 3,826 7,976Effect of treasury shares held (691) (1,303)Weighted average number of ordinary shares issued during the year 3,118,857 3,115,279

Diluted earnings per share

When calculating diluted earnings per share, the weighted average number of ordinary shares is adjusted for the effect of all dilutive potential ordinary shares. The Group has two categories of dilutive potential ordinary shares from performance share plans and restricted share plans (2017: two categories of dilutive potential ordinary shares from performance share plans and restricted share plans).

The weighted average number of ordinary shares adjusted for the dilutive potential shares is as follows:

group 2018$’000

2017$’000

number of sharesWeighted average number of ordinary shares

(used in the calculation of basic earnings per share) 3,118,857 3,115,279Adjustment for dilutive potential ordinary shares 17,319 16,928Number of shares that would have been issued at fair value – (1,371)Weighted average number of ordinary shares (diluted) during the year 3,136,176 3,130,836

In the prior year, the average market value of one ordinary share was $3.55 per share for the purposes of calculating the dilutive effect of share options for the period during which the options were outstanding. There were no share options outstanding during the year.



b6 taxation

(i) tax expenses

group 2018$’000

2017$’000

Current income tax Current year 127,422 120,624 Overprovision in respect of prior years (8,461) (8,882)

118,961 111,742Deferred income tax Current year (12,181) 5,096 Overprovision in respect of prior years (2,406) (10,804) Effect of reduction in tax rate (48) (20,313)

(14,635) (26,021)

104,326 85,721

A reconciliation between tax expense and the product of accounting profit multiplied by the applicable corporate tax rate for the year ended 31 December is as follows:

group 2018$’000

2017$’000

Profit before taxation 620,748 611,814

Taxation at statutory tax rate of 17% (2017: 17%) 105,527 104,008Adjustments:Income not subject to tax (8,728) (3,540)Expenses not deductible for tax purposes 26,294 24,231Different tax rates of other countries 2,411 3,167Overprovision in prior years, net (10,867) (19,686)Effect of change in tax rates (48) (20,313)Effect of results of associates and joint ventures presented net of tax (8,340) (8,386)Tax incentives (1,324) (2,778)Deferred tax assets not recognised 10,520 15,643Deferred tax assets previously not recognised now utilised (8,769) (6,580)Others (2,350) (45)

104,326 85,721

168 ST ENGINEERING


b6 taxation (continued)

(ii) Deferred tax assets and liabilities

(a) recognised deferred tax assets and liabilities

Deferred tax assets and liabilities are attributable to the following:

Assets liabilities

group 2018$’000

2017$’000

2018$’000

2017$’000

Property, plant and equipment (249) (267) 111,267 110,251Intangible assets (4,293) – 182,447 180,852Allowance for doubtful debts (1,721) (990) – –Allowance for inventory obsolescence (20,396) (13,865) – –Provisions and accruals (110,042) (121,089) – –Unabsorbed capital allowances and

unutilised tax losses (56,682) (26,844) – –Fair value of derivative financial

instruments designated as cash flow hedges (7,447) (666) 530 5,401

Fair value of defined benefit plan (13,798) (13,124) – –Other items (9,215) (8,675) 28,189 20,188Deferred tax (assets)/liabilities (223,843) (185,520) 322,433 316,692Set off of tax 151,707 111,492 (151,707) (111,492)Net deferred tax (assets)/ liabilities (72,136) (74,028) 170,726 205,200

(b) unrecognised deferred tax assets

Deferred tax assets have not been recognised in respect of the following items:

group 2018$’000

2017$’000

Tax losses 359,059 413,285Deductible temporary differences 8,895 17,869Unabsorbed wear and tear allowance and investment allowance 1,306 5,470

369,260 436,624

(c) unrecognised temporary differences relating to investments in subsidiaries

As at 31 December 2018, a deferred tax liability of $121,015,000 (2017: $121,028,000) for temporary difference of $484,367,000 (2017: $470,431,000) related to undistributed earnings of certain subsidiaries was not recognised as the Group has determined that the undistributed profits of its overseas subsidiaries will not be remitted to Singapore in the foreseeable future, but will be retained for organic growth and acquisitions.




(ii) Deferred tax assets and liabilities (continued)

(d) movement in deferred tax balances during the year:

group

As at 1 January

2017$’000

recognisedin profit

or loss$’000

recognisedin other

comprehensiveincome

$’000

Acquiredin business

combinations$’000

utilisation of tax losses$’000

exchangedifference

$’000

As at 31 December

2017$’000

recognisedin profit

or loss$’000

recognisedin other

comprehensiveincome

$’000

Deconsolidation of a subsidiary/

finalisation ofpurchase price

allocation$’000

utilisation of taxlosses$’000

exchangedifference

$’000

As at 31 December

2018$’000

Property, plant and equipment 113,551 (699) – – – (2,868) 109,984 369 – 2 – 663 111,018

Intangible assets 195,360 (17,402) – 7,647 – (4,753) 180,852 399 – (4,290) – 1,193 178,154Allowance for

doubtful debts (1,655) 569 – – – 96 (990) (709) – 4 – (26) (1,721)Allowance for

inventory obsolescence (25,581) 10,613 – – – 1,103 (13,865) (6,261) – 14 – (284) (20,396)

Provisions and accruals (131,691) 8,407 – – – 2,195 (121,089) 11,353 15 16 – (337) (110,042)

Unabsorbed capital allowances and unutilised tax losses (25,072) (20,329) – – 17,090 1,467 (26,844) (27,258) – 3 (1,924) (659) (56,682)

Fair value of derivative financial instruments designated as cash flow hedges (12,788) 259 17,514 – 84 (334) 4,735 (36) (11,535) – – (81) (6,917)

Fair value of defined benefit plan (10,087) – (2,555) – – (482) (13,124) – (950) – – 276 (13,798)

Other items 22,027 (7,439) (17) – (2,705) (353) 11,513 7,508 – (38) – (9) 18,974

124,064 (26,021) 14,942 7,647 14,469 (3,929) 131,172 (14,635) (12,470) (4,289) (1,924) 736 98,590

170 ST ENGINEERING



(ii) Deferred tax assets and liabilities (continued)

(d) movement in deferred tax balances during the year:

group

As at 1 January

2017$’000

recognisedin profit

or loss$’000

recognisedin other

comprehensiveincome

$’000

Acquiredin business

combinations$’000

utilisation of tax losses$’000

exchangedifference

$’000

As at 31 December

2017$’000

recognisedin profit

or loss$’000

recognisedin other

comprehensiveincome

$’000

Deconsolidation of a subsidiary/

finalisation ofpurchase price

allocation$’000

utilisation of taxlosses$’000

exchangedifference

$’000

As at 31 December

2018$’000

Property, plant and equipment 113,551 (699) – – – (2,868) 109,984 369 – 2 – 663 111,018

Intangible assets 195,360 (17,402) – 7,647 – (4,753) 180,852 399 – (4,290) – 1,193 178,154Allowance for

doubtful debts (1,655) 569 – – – 96 (990) (709) – 4 – (26) (1,721)Allowance for

inventory obsolescence (25,581) 10,613 – – – 1,103 (13,865) (6,261) – 14 – (284) (20,396)

Provisions and accruals (131,691) 8,407 – – – 2,195 (121,089) 11,353 15 16 – (337) (110,042)

Unabsorbed capital allowances and unutilised tax losses (25,072) (20,329) – – 17,090 1,467 (26,844) (27,258) – 3 (1,924) (659) (56,682)

Fair value of derivative financial instruments designated as cash flow hedges (12,788) 259 17,514 – 84 (334) 4,735 (36) (11,535) – – (81) (6,917)

Fair value of defined benefit plan (10,087) – (2,555) – – (482) (13,124) – (950) – – 276 (13,798)

Other items 22,027 (7,439) (17) – (2,705) (353) 11,513 7,508 – (38) – (9) 18,974

124,064 (26,021) 14,942 7,647 14,469 (3,929) 131,172 (14,635) (12,470) (4,289) (1,924) 736 98,590




Current tax

Current tax is measured at the amount expected to be recovered from or paid to the tax authorities, using tax rates and tax laws that are enacted or substantively enacted by the reporting date.

Deferred tax

Deferred tax is accounted for in respect of temporary differences arising from differences between the carrying amount of assets and liabilities and the corresponding tax base.

Deferred tax liabilities are recognised for all taxable temporary differences. Deferred tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that sufficient future taxable profits will be available to utilise them.

However, deferred tax assets and liabilities are not recognised for:• temporary differences on the initial recognition of assets or liabilities in a transaction that is not a

business combination which affects neither accounting nor taxable profit or loss; and • taxabletemporarydifferencesarisingontheinitialrecognitionofgoodwill.

Deferred tax assets and deferred tax liabilities are offset, if a legally enforceable right exists and they relate to taxes levied by the same tax authority on the same taxable entity.

Current tax and deferred tax is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.

Key estimate and judgement: income taxes

The Group is subject to income taxes in Singapore and jurisdictions where it has foreign operations. Judgement is required in determining the worldwide provision for income taxes and in assessing whether deferred tax balances are recognised on the balance sheet. Changes in circumstances will alter expectations, which may impact the amount of provision for income taxes and deferred tax balances recognised.

Key estimate and judgement: recovery of deferred tax assets

Deferred tax assets are recognised for tax losses and deductible temporary differences to the extent that it is probable that sufficient future taxable profits will be available to utilise them. Judgement and estimates are required to determine the amount of deferred tax assets that can be recognised, based upon the likely timing and the level of future taxable profits.


172 ST ENGINEERING


c I oPerAting Assets AnD liAbilities

This section provides information relating to the operating assets and liabilities of the Group.

The Group maintains a strong balance sheet to support the Group’s strategy to maximise returns to the shareholders through efficient use of capital, taking into consideration the Group’s expenditures, growth and investment requirements.

c1 Property, plant and equipment c9 Amounts due to related parties

c2 Intangible assets c10 Provisions

c3 Amounts due from related parties c11 Deferred income

c4 Inventories c12 Contract balances

c5 Trade receivables c13 Financial risk management objectives and policies

c6 Advances and other receivables c14 Classification and fair value of financial instruments

c7 Bank balances and other liquid funds c15 Derivative financial instruments

c8 Trade payables and accruals



c1 Property, plant and equipment

cost

group

At cost

As at 1 January

$’000Additions *

$’000

Disposals/write-off

$’000

Arising from acquisition

of interest insubsidiaries/

deconsolidation/disposal of

subsidiaries$’000

reclassifications$’000

translationdifference

$’000

As at 31 December

$’000

2018Freehold land and buildings 85,100 2,463 – – 2,233 1,053 90,849Leasehold land and buildings 1,186,513 8,530 (9,451) (84,552) 634 2,450 1,104,124Improvements to premises 153,981 4,922 (625) (502) (490) 1,278 158,564Wharves and slipways 47,050 – – – – 421 47,471Syncrolift and floating docks 89,749 – – – – 410 90,159Boats and barges 177,380 – (75) – – 31 177,336Plant and machinery 958,136 64,862 (10,792) (15,715) 6,168 (365) 1,002,294Production tools and equipment 381,109 22,692 (10,226) (771) 2,838 1,445 397,087Furniture, fittings, office equipment and computers 312,091 38,190 (9,562) (5,319) 7,623 1,241 344,264Transportation equipment and vehicles 16,946 2,543 (1,486) (595) (1) 26 17,433Aircraft and aircraft engines 255,607 105,203 (2,956) (4,088) (44,699) 1,646 310,713Satellite 13,698 – – – – – 13,698Construction-in-progress 45,177 85,365 (12) (668) (37,274) (511) 92,077

3,722,537 334,770 (45,185) (112,210) (62,968) 9,125 3,846,069

2017Freehold land and buildings 75,460 12,255 – – 2,902 (5,517) 85,100Leasehold land and buildings 1,122,002 29,431 (670) – 49,039 (13,289) 1,186,513Improvements to premises 136,835 11,760 (1,590) 4 12,667 (5,695) 153,981Wharves and slipways 47,361 9 – – 1,152 (1,472) 47,050Syncrolift and floating docks 91,023 249 – – (14) (1,509) 89,749Boats and barges 177,361 120 – – – (101) 177,380Plant and machinery 875,800 79,951 (16,542) – 32,097 (13,170) 958,136Production tools and equipment 359,816 31,119 (2,227) 307 545 (8,451) 381,109Furniture, fittings, office equipment and computers 290,641 35,617 (11,916) 682 3,044 (5,977) 312,091Transportation equipment and vehicles 16,318 2,104 (1,197) – 5 (284) 16,946Aircraft and aircraft engines 253,557 1,370 – – 8,339 (7,659) 255,607Satellite 13,698 – – – – – 13,698Construction-in-progress 96,472 68,689 (193) – (119,781) (10) 45,177

3,556,344 272,674 (34,335) 993 (10,005) (63,134) 3,722,537

* In the prior year, the Group’s wholly-owned subsidiary, Vision Technologies Marine, Inc. acquired selected marine repair assets in Pascagoula, Mississippi in the US. This transaction has been accounted as an asset acquisition and was settled by cash consideration of $34 million (US$25 million).

174 ST ENGINEERING


c1 Property, plant and equipment

cost

group

At cost

As at 1 January

$’000Additions *

$’000

Disposals/write-off

$’000

Arising from acquisition

of interest insubsidiaries/

deconsolidation/disposal of

subsidiaries$’000

reclassifications$’000


$’000

As at 31 December

$’000

2018Freehold land and buildings 85,100 2,463 – – 2,233 1,053 90,849Leasehold land and buildings 1,186,513 8,530 (9,451) (84,552) 634 2,450 1,104,124Improvements to premises 153,981 4,922 (625) (502) (490) 1,278 158,564Wharves and slipways 47,050 – – – – 421 47,471Syncrolift and floating docks 89,749 – – – – 410 90,159Boats and barges 177,380 – (75) – – 31 177,336Plant and machinery 958,136 64,862 (10,792) (15,715) 6,168 (365) 1,002,294Production tools and equipment 381,109 22,692 (10,226) (771) 2,838 1,445 397,087Furniture, fittings, office equipment and computers 312,091 38,190 (9,562) (5,319) 7,623 1,241 344,264Transportation equipment and vehicles 16,946 2,543 (1,486) (595) (1) 26 17,433Aircraft and aircraft engines 255,607 105,203 (2,956) (4,088) (44,699) 1,646 310,713Satellite 13,698 – – – – – 13,698Construction-in-progress 45,177 85,365 (12) (668) (37,274) (511) 92,077

3,722,537 334,770 (45,185) (112,210) (62,968) 9,125 3,846,069

2017Freehold land and buildings 75,460 12,255 – – 2,902 (5,517) 85,100Leasehold land and buildings 1,122,002 29,431 (670) – 49,039 (13,289) 1,186,513Improvements to premises 136,835 11,760 (1,590) 4 12,667 (5,695) 153,981Wharves and slipways 47,361 9 – – 1,152 (1,472) 47,050Syncrolift and floating docks 91,023 249 – – (14) (1,509) 89,749Boats and barges 177,361 120 – – – (101) 177,380Plant and machinery 875,800 79,951 (16,542) – 32,097 (13,170) 958,136Production tools and equipment 359,816 31,119 (2,227) 307 545 (8,451) 381,109Furniture, fittings, office equipment and computers 290,641 35,617 (11,916) 682 3,044 (5,977) 312,091Transportation equipment and vehicles 16,318 2,104 (1,197) – 5 (284) 16,946Aircraft and aircraft engines 253,557 1,370 – – 8,339 (7,659) 255,607Satellite 13,698 – – – – – 13,698Construction-in-progress 96,472 68,689 (193) – (119,781) (10) 45,177

3,556,344 272,674 (34,335) 993 (10,005) (63,134) 3,722,537

* In the prior year, the Group’s wholly-owned subsidiary, Vision Technologies Marine, Inc. acquired selected marine repair assets in Pascagoula, Mississippi in the US. This transaction has been accounted as an asset acquisition and was settled by cash consideration of $34 million (US$25 million).



c1 Property, plant and equipment (continued)

Accumulated depreciation

group

At cost

As at 1 January

$’000

Depreciationcharge/

impairmentlosses

for the year$’000

Disposals/write-off

$’000

Deconsolidation/disposal of

subsidiaries$’000

reclassifications $’000


$’000

As at 31 December

$’000

2018Freehold land and buildings 26,162 2,189 – – 14 525 28,890Leasehold land and buildings 574,596 43,044 (9,149) (24,568) (8) 1,784 585,699Improvements to premises 67,903 10,675 (606) (305) – 397 78,064Wharves and slipways 30,963 1,356 – – – 150 32,469Syncrolift and floating docks 74,748 1,489 – – – 131 76,368Boats and barges 65,997 5,701 (33) – – 30 71,695Plant and machinery 534,897 65,573 (9,845) (11,637) (8,407) (515) 570,066Production tools and equipment 253,675 23,014 (8,985) (363) (6) 2,596 269,931Furniture, fittings, office equipment and computers 260,950 24,551 (9,214) (4,725) (12) 937 272,487Transportation equipment and vehicles 13,255 1,514 (1,385) (556) – 13 12,841Aircraft and aircraft engines 95,885 12,949 (2,956) (799) (7,567) 455 97,967Satellite 4,110 2,740 – – – – 6,850

2,003,141 194,795 (42,173) (42,953) (15,986) 6,503 2,103,327

2017Freehold land and buildings 26,664 1,504 – – – (2,006) 26,162Leasehold land and buildings 541,516 40,822 (568) – 204 (7,378) 574,596Improvements to premises 62,270 9,030 (1,589) – (29) (1,779) 67,903Wharves and slipways 30,071 1,363 – – – (471) 30,963Syncrolift and floating docks 73,611 1,502 – – – (365) 74,748Boats and barges 60,106 5,994 – – – (103) 65,997Plant and machinery 500,406 60,214 (14,808) – (233) (10,682) 534,897Production tools and equipment 243,167 20,935 (2,155) – (3,583) (4,689) 253,675Furniture, fittings, office equipment and computers 250,316 24,050 (11,841) – 3,618 (5,193) 260,950Transportation equipment and vehicles 13,119 1,547 (1,190) – 23 (244) 13,255Aircraft and aircraft engines 83,596 13,978 – – – (1,689) 95,885Satellite 1,370 2,740 – – – – 4,110

1,886,212 183,679 (32,151) – – (34,599) 2,003,141

176 ST ENGINEERING



Accumulated depreciation

group

At cost

As at 1 January

$’000

Depreciationcharge/

impairmentlosses

for the year$’000

Disposals/write-off

$’000

Deconsolidation/disposal of

subsidiaries$’000

reclassifications $’000


$’000

As at 31 December

$’000

2018Freehold land and buildings 26,162 2,189 – – 14 525 28,890Leasehold land and buildings 574,596 43,044 (9,149) (24,568) (8) 1,784 585,699Improvements to premises 67,903 10,675 (606) (305) – 397 78,064Wharves and slipways 30,963 1,356 – – – 150 32,469Syncrolift and floating docks 74,748 1,489 – – – 131 76,368Boats and barges 65,997 5,701 (33) – – 30 71,695Plant and machinery 534,897 65,573 (9,845) (11,637) (8,407) (515) 570,066Production tools and equipment 253,675 23,014 (8,985) (363) (6) 2,596 269,931Furniture, fittings, office equipment and computers 260,950 24,551 (9,214) (4,725) (12) 937 272,487Transportation equipment and vehicles 13,255 1,514 (1,385) (556) – 13 12,841Aircraft and aircraft engines 95,885 12,949 (2,956) (799) (7,567) 455 97,967Satellite 4,110 2,740 – – – – 6,850

2,003,141 194,795 (42,173) (42,953) (15,986) 6,503 2,103,327

2017Freehold land and buildings 26,664 1,504 – – – (2,006) 26,162Leasehold land and buildings 541,516 40,822 (568) – 204 (7,378) 574,596Improvements to premises 62,270 9,030 (1,589) – (29) (1,779) 67,903Wharves and slipways 30,071 1,363 – – – (471) 30,963Syncrolift and floating docks 73,611 1,502 – – – (365) 74,748Boats and barges 60,106 5,994 – – – (103) 65,997Plant and machinery 500,406 60,214 (14,808) – (233) (10,682) 534,897Production tools and equipment 243,167 20,935 (2,155) – (3,583) (4,689) 253,675Furniture, fittings, office equipment and computers 250,316 24,050 (11,841) – 3,618 (5,193) 260,950Transportation equipment and vehicles 13,119 1,547 (1,190) – 23 (244) 13,255Aircraft and aircraft engines 83,596 13,978 – – – (1,689) 95,885Satellite 1,370 2,740 – – – – 4,110

1,886,212 183,679 (32,151) – – (34,599) 2,003,141




net book value

group

At cost

31 December2018$’000

31 December2017$’000

1 January 2017$’000

Freehold land and buildings 61,959 58,938 48,796Leasehold land and buildings 518,425 611,917 580,486Improvements to premises 80,500 86,078 74,565Wharves and slipways 15,002 16,087 17,290Syncrolift and floating docks 13,791 15,001 17,412Boats and barges 105,641 111,383 117,255Plant and machinery 432,228 423,239 375,394Production tools and equipment 127,156 127,434 116,649Furniture, fittings, office equipment and computers 71,777 51,141 40,325Transportation equipment and vehicles 4,592 3,691 3,199Aircraft and aircraft engines 212,746 159,722 169,961Satellite 6,848 9,588 12,328Construction-in-progress 92,077 45,177 96,472

1,742,742 1,719,396 1,670,132

Reclassifications due to changes in the use of assets:

(a) Plant and machinery with net book value amounting to $47,293,000 (2017: $320,000; 1 January 2017: $1,982,000) were reclassified to inventories;

(b) No plant and machinery (2017: net book value amounting to $9,685,000; 1 January 2017: Nil) was reclassified as prepayment for land use right; and

(c) Inventories of $311,000 (2017: Nil; 1 January 2017: $3,049,000) were reclassified to property, plant and equipment.

There were no movements in the following amounts carried at valuation from 1 January 2017 to 31 December 2018.

group Valuation$’000

Accumulateddepreciation

$’000

net book value$’000

At ValuationLeasehold land and buildings 1,919 1,919 –Wharves and slipways 1,317 1,317 –Syncrolift and floating docks 4,613 4,613 –Plant and machinery 1,683 1,683 –Furniture, fittings, office equipment and computers 285 285 –

(a) Property, plant and equipment pledged as security

Property, plant and equipment of certain overseas subsidiaries of the Group with a carrying value of $56,336,000 (2017: $107,201,000; 1 January 2017: $62,252,000) are pledged as security for bank loans.

178 ST ENGINEERING



(b) Property, plant and equipment under lease obligations

Included in the above are property, plant and equipment acquired under finance lease obligations with a net book value of:

group 2018$’000

2017$’000

1 January2017$’000

Leasehold land and buildings 12,589 15,064 16,953Furniture, fittings, office equipment and computers 570 549 755

13,159 15,613 17,708

(c) major properties

Major leasehold land and buildings and improvements to premises are:

net book value

location Description tenureland area

(sq. m.)2018$’000

2017$’000

1 January2017$’000

singapore

1 Ang Mo Kio Electronics Park Road

Industrial and commercial buildings

30 years from 1.11.2011

20,000 51,378 55,473 59,892

3 Ang Mo Kio Electronics Park Road


30 years from 1.12.2015

30,000 43,625 46,271 –

249 Jalan Boon Lay


27 years from 1.10.2001 to 31.12.2028, renewable to 10.10.2065

206,031 97,465 103,096 109,876

People’s republic of china

No 2, Huayu Road, Huli District, Xiamen361006, Fujian

Leasehold land for factory building

50 years from 20.11.2008

38,618 42,681 45,218 46,957

germany

Grenzstr. 1, Dresden

Hangar and office building

31 years from1.1.1994

110,145 40,333 43,818 24,479

For this purpose, freehold and leasehold land and buildings, and improvements to premises are considered major properties if the net book value of these assets represent 5% or more of the Group’s aggregated net book value in these categories.




Property, plant and equipment are carried at cost less accumulated depreciation and accumulated impairment losses.

Cost comprises expenditure that is:• directlyattributabletotheacquisitionoftheasset;• subsequentcostsincurredtoreplacepartsthatareeligibleforcapitalisation;and/or• transfers fromequityonqualifyingcashflowhedgesof foreigncurrencypurchasesofproperty,plant

and equipment.

Certain items of property, plant and equipment which were subject to a one-time valuation in 1972 are stated at valuation, net of depreciation and any impairment losses.

Finance lease (as lessee)

Finance leases are those leasing agreements, which effectively transfer to the Group substantially all the risks and benefits incidental to ownership of an asset.

Assets financed under such leases are capitalised at the lower of its fair value and the present value of the minimum lease payments at the inception of the lease. Lease payments are apportioned between the finance charges and reduction of the lease liability so as to achieve a constant rate of interest on the remaining balance of the liability. Finance charges are charged to profit or loss.

Disposals

Gains or losses on disposal of property, plant and equipment are included in profit or loss.


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Depreciation

Depreciation of property, plant and equipment is recognised in profit and loss on a straight line basis over their useful lives, except for freehold land which are not depreciated, and leasehold land which are depreciated over the remaining lease term. The estimated useful lives are as follows:

item # useful life

Buildings 2 to 60 years*

Leasehold land Over the period of the lease of between 2 and 50 years*

Improvements to premises 3 to 30 years*

Wharves and slipways 20 years

Syncrolift and floating docks 15 years

Boats and barges 10 to 23 years

Plant and machinery 5 to 25 years

Production tools and equipment 3 to 15 years

Furniture, fittings, office equipment and computers

2 to 10 years

Transportation equipment and vehicles 4 to 5 years

Aircraft and aircraft engines 15 to 30 years

Satellite 5 years

# Property, plant and equipment purchased specifically for projects are depreciated over the useful life or the duration of the project, whichever is shorter.

* Refer to Note C1(c) Major Properties for details of the lease tenure used to approximate the useful lives of the leasehold land, buildings and improvements.

impairment

The carrying amounts of property, plant and equipment are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indications exists, then the asset’s recoverable amount is estimated. An impairment loss is recognised if the carrying amount of an asset or its related cash generating unit exceeds its estimated recoverable amount.

Key estimate and judgement: Depreciation charge

Management estimates the useful lives based on factors such as changes in the expected level of usage and technological developments. These are reassessed at each reporting date, and adjusted prospectively, where appropriate.




c2 intangible assets

group goodwill$’000

Dealernetwork

$’000

Developmentexpenditure

$’000

commercialand intellectualproperty rights

$’000brands

$’000licenses

$’000

technologyagreement

$’000

Authorised repair centre

agreement$’000

others $’000

total$’000

costAt 1 January 2017 563,858 172,800 240,711 76,469 86,265 57,487 36,464 5,857 18,928 1,258,839

Additions – – 70,548 2,721 – – – 2 – 73,271

Acquisition of subsidiaries 39,825 – – 20,406 – – – – – 60,231

Translation difference (37,198) 6,301 1,641 (5,092) (6,115) (21) (2,721) – – (43,205)

At 31 December 2017 and 1 January 2018 566,485 179,101 312,900 94,504 80,150 57,466 33,743 5,859 18,928 1,349,136

Additions – – 114,789 619 – – – – – 115,408

Finalisation of purchase price allocation (4,293) – – – – – – – – (4,293)

Deconsolidation/disposal of subsidiaries (10,883) – – (1,366) – (996) – – – (13,245)

Write-off – – – – – – – – (120) (120)

Translation difference 9,694 (3,211) (3,163) 1,144 1,625 (151) 731 – – 6,669

At 31 December 2018 561,003 175,890 424,526 94,901 81,775 56,319 34,474 5,859 18,808 1,453,555

Accumulated amortisation and impairment lossesAt 1 January 2017 56,715 21,884 41,364 67,699 14,081 7,497 10,615 1,339 18,060 239,254

Amortisation for the year * – 7,620 14,260 3,265 1,314 2,414 2,636 1,339 495 33,343

Impairment losses + – – – – – – – – 11 11

Translation difference (2,422) (226) (2,269) (4,213) (876) (13) (865) – – (10,884)

At 31 December 2017 and 1 January 2018 54,293 29,278 53,355 66,751 14,519 9,898 12,386 2,678 18,566 261,724


Impairment losses/(write-back of impairment) + 307 – – 62 – 1,503 – – (11) 1,861

Deconsolidation/disposal of subsidiaries (10,883) – – (1,366) – – – – – (12,249)

Write-off – – – – – – – – (97) (97)

Translation difference (54) (326) 894 779 250 (95) 299 1 (1) 1,747

At 31 December 2018 43,663 36,573 83,780 70,812 15,958 13,706 15,274 4,018 18,533 302,317

net book valueAt 31 December 2018 517,340 139,317 340,746 24,089 65,817 42,613 19,200 1,841 275 1,151,238

At 31 December 2017 512,192 149,823 259,545 27,753 65,631 47,568 21,357 3,181 362 1,087,412

At 1 January 2017 507,143 150,916 199,347 8,770 72,184 49,990 25,849 4,518 868 1,019,585

* Amortisation charge of $49,331,000 (2017: $33,343,000) is recognised in the income statement as part of:

- Other operating expenses of $11,755,000 (2017: $15,072,000); and

- Cost of sales of $37,576,000 (2017: $18,271,000)+ During the year, the Group assessed that certain licenses and commercial and intellectual property rights were impaired

as these intangible assets were not expected to be generating future economic benefits. Impairment losses of $1,565,000 (2017: $11,000) were recognised in other operating expenses in the income statement.

During the year, an impairment loss on goodwill of $307,000 (2017: Nil) was recognised in other operating expenses in the income statement as the recoverable amount of one CGU was determined to be lower than the carrying amount.

182 ST ENGINEERING


c2 intangible assets

group goodwill$’000

Dealernetwork

$’000

Developmentexpenditure

$’000

commercialand intellectualproperty rights

$’000brands

$’000licenses

$’000

technologyagreement

$’000

Authorised repair centre

agreement$’000

others $’000

total$’000

costAt 1 January 2017 563,858 172,800 240,711 76,469 86,265 57,487 36,464 5,857 18,928 1,258,839

Additions – – 70,548 2,721 – – – 2 – 73,271

Acquisition of subsidiaries 39,825 – – 20,406 – – – – – 60,231

Translation difference (37,198) 6,301 1,641 (5,092) (6,115) (21) (2,721) – – (43,205)

At 31 December 2017 and 1 January 2018 566,485 179,101 312,900 94,504 80,150 57,466 33,743 5,859 18,928 1,349,136

Additions – – 114,789 619 – – – – – 115,408

Finalisation of purchase price allocation (4,293) – – – – – – – – (4,293)

Deconsolidation/disposal of subsidiaries (10,883) – – (1,366) – (996) – – – (13,245)

Write-off – – – – – – – – (120) (120)

Translation difference 9,694 (3,211) (3,163) 1,144 1,625 (151) 731 – – 6,669

At 31 December 2018 561,003 175,890 424,526 94,901 81,775 56,319 34,474 5,859 18,808 1,453,555

Accumulated amortisation and impairment lossesAt 1 January 2017 56,715 21,884 41,364 67,699 14,081 7,497 10,615 1,339 18,060 239,254


Impairment losses + – – – – – – – – 11 11

Translation difference (2,422) (226) (2,269) (4,213) (876) (13) (865) – – (10,884)

At 31 December 2017 and 1 January 2018 54,293 29,278 53,355 66,751 14,519 9,898 12,386 2,678 18,566 261,724


Impairment losses/(write-back of impairment) + 307 – – 62 – 1,503 – – (11) 1,861

Deconsolidation/disposal of subsidiaries (10,883) – – (1,366) – – – – – (12,249)

Write-off – – – – – – – – (97) (97)

Translation difference (54) (326) 894 779 250 (95) 299 1 (1) 1,747

At 31 December 2018 43,663 36,573 83,780 70,812 15,958 13,706 15,274 4,018 18,533 302,317

net book valueAt 31 December 2018 517,340 139,317 340,746 24,089 65,817 42,613 19,200 1,841 275 1,151,238

At 31 December 2017 512,192 149,823 259,545 27,753 65,631 47,568 21,357 3,181 362 1,087,412

At 1 January 2017 507,143 150,916 199,347 8,770 72,184 49,990 25,849 4,518 868 1,019,585

* Amortisation charge of $49,331,000 (2017: $33,343,000) is recognised in the income statement as part of:

- Other operating expenses of $11,755,000 (2017: $15,072,000); and

- Cost of sales of $37,576,000 (2017: $18,271,000)+ During the year, the Group assessed that certain licenses and commercial and intellectual property rights were impaired

as these intangible assets were not expected to be generating future economic benefits. Impairment losses of $1,565,000 (2017: $11,000) were recognised in other operating expenses in the income statement.

During the year, an impairment loss on goodwill of $307,000 (2017: Nil) was recognised in other operating expenses in the income statement as the recoverable amount of one CGU was determined to be lower than the carrying amount.




(i) Goodwill

Goodwill represents the excess of:• thefairvalueoftheconsiderationtransferred;plus• therecognisedamountofanynon-controllinginterestsintheacquiree;plus• if thebusiness combination is achieved in stages, the fair valueof the existingequity interest

in the acquiree, over the net recognised amount (generally fair value) of the identifiable assets acquired and

liabilities assumed.

When the excess is negative, a bargain purchase gain is recognised immediately in profit or loss.

Goodwill is initially measured at cost. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses.

(ii) Other intangible assets

class of intangible assets background Valuation method useful lives

Dealer network Includes customer relationships and networks acquired

initial recognition:

Separately acquired intangible assets are recognised at cost.

Intangible assets arising from business combinations are recognised at fair value at the date of acquisition.

subsequent measurement:

Intangible assets are carried at cost less any accumulated amortisation and accumulated impairment losses following initial recognition.

Amortisation is calculated on a straight line basis over the estimated useful lives.

5 to 25 years

Commercial and intellectual property rights

Relates to intellectual property

2 to 16 years

Brands Includes LeeBoy™ and Rosco brands of road construction equipment

Aerospace: 5 yearsElectronics: 20 yearsLand: 70 years

Licenses Relates to licenses to- conduct commercial

aviation activities- purchase and lease Boeing parts- develop MRO capabilities

for specific aircraft types

7 to 30 years

Technology agreement

Relates to the intellectual property required to operate the EcoPower Engine Wash business

13 years

Authorised repair centre agreements

Relates to the sole appointed authorised service centre for repair and overhaul of landing gear

5 years

c2 intangible assets (continued)

184 ST ENGINEERING


recognition and measurement (continued)

(ii) Other intangible assets (continued)

class of intangible assets background Valuation method useful lives

Development expenditure

Development expenditure on an individual project is recognised as an intangible asset when the Group can demonstrate the technical and commercial feasibility of development. The capitalised costs are directly attributable to activities preparing the asset for its intended use, and capitalised borrowing costs. In any other circumstances, development costs are recognised in profit or loss as incurred.

Included in development cost are costs related to development and assembly of aircraft seats*, B757 15-PTF, A330-200 PTF, A330-300 PTF and A320/A321 PTF*.

* Amortisation have been deferred for the year ended 31 December 2018 as the assets are not yet ready for management’s intended use.

(i) Initially recognised at cost(ii) Subsequently,

carried at cost less any accumulated amortisation and impairment losses

B757 15-PTF: 4 years

A330-200 PTF and A330-300 PTF: 41 years

Others:2 to 10 years

(iii) Subsequent expenditure

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated intangible assets, is recognised in profit or loss as incurred.

impairment review

The Group tests intangible assets for impairment to ensure they are not carried at above their recoverable amounts annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

These tests are performed by assessing the recoverable amount of each individual asset or, if this is not possible, then the recoverable amount of the cash generating unit (CGU) to which the asset belongs. CGUs are the lowest levels at which assets are grouped and generate separately identifiable cash flows.

The recoverable amount is the higher of an asset or a CGU’s fair value less costs to sell and value-in-use. The value-in-use calculations are based on discounted cash flows expected to arise from the asset.

reversal of impairment

Intangible assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.





Key estimate and judgement: recognition and measurement of intangible assets

Assessment of the recoverable amount, useful life of an intangible asset (reassessed at each reporting date) requires management’s judgement.

Aggregate carrying amounts of goodwill allocated to each CGU within the business divisions and the key assumptions used in determining the recoverable amount of each CGU are as follows:

Pre-tax discount rate terminal value growth rate

group 2018$’000

2017$’000

1 January 2017$’000

2018%

2017%

1 January 2017

%2018

%2017

%

1 January 2017

%

Aerospace

Aircraft Maintenance & Modification 13,666 13,400 14,392 11.0 – 11.5 10.5 – 12.5 9.5 – 12.8 2.0 – 2.5 2.0 – 2.5 2.0 – 3.5

Component/Engine Repair & Overhaul 13,381 13,097 14,153 15.2 14.1 10.4 2.4 2.5 3.0

Engineering & Material Services 26,168 26,683 25,569 12.4 6.9 – 12.6 6.5 – 9.8 1.0 2.0 1.3 – 2.0

electronics

Communication & Sensor Systems Group 246,747 241,427 261,234 10.0 – 10.6 10.5 – 13.5 10.4 – 12.7 4.0 – 5.0 4.0 – 5.0 4.0 – 5.0

Software Systems Group 27,866 27,536 28,764 8.7 – 13.1 8.6 – 22.2 8.5 – 19.6 2.0 – 3.0 2.0 – 3.0 2.0 – 3.0

land systems

Automotive 154,260 155,544 125,744 12.3 – 15.3 12.9 – 16.0 7.8 – 18.6 3.0 – 3.5 4.0 4.2 – 5.0

Others 35,252 34,505 37,287 10.0 12.4 11.7 3.0 3.0 3.0

517,340 512,192 507,143

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Pre-tax discount rate terminal value growth rate

group 2018$’000

2017$’000

1 January 2017$’000

2018%

2017%

1 January 2017

%2018

%2017

%

1 January 2017

%

Aerospace

Aircraft Maintenance & Modification 13,666 13,400 14,392 11.0 – 11.5 10.5 – 12.5 9.5 – 12.8 2.0 – 2.5 2.0 – 2.5 2.0 – 3.5

Component/Engine Repair & Overhaul 13,381 13,097 14,153 15.2 14.1 10.4 2.4 2.5 3.0

Engineering & Material Services 26,168 26,683 25,569 12.4 6.9 – 12.6 6.5 – 9.8 1.0 2.0 1.3 – 2.0

electronics

Communication & Sensor Systems Group 246,747 241,427 261,234 10.0 – 10.6 10.5 – 13.5 10.4 – 12.7 4.0 – 5.0 4.0 – 5.0 4.0 – 5.0

Software Systems Group 27,866 27,536 28,764 8.7 – 13.1 8.6 – 22.2 8.5 – 19.6 2.0 – 3.0 2.0 – 3.0 2.0 – 3.0

land systems

Automotive 154,260 155,544 125,744 12.3 – 15.3 12.9 – 16.0 7.8 – 18.6 3.0 – 3.5 4.0 4.2 – 5.0

Others 35,252 34,505 37,287 10.0 12.4 11.7 3.0 3.0 3.0

517,340 512,192 507,143





The recoverable amounts of the CGUs are determined based on value-in-use calculations, using cash flow projections derived from the financial budgets approved by management for the next five years. The key assumptions used in the calculation of recoverable amounts are as follows:

• Thediscountrateusedisestimatedbasedontheindustryweightedaveragecostofcapital.

• The long-term terminal value growth rate has been determinedbasedon either the nominalGDP rates for the country in which the CGU is based or the long-term growth rate estimated by management by reference to forecasts included in industry reports and expected market development.

sensitivity to changes in assumptions:

(a) Management has identified the following key assumption for which a change as set out below could cause the carrying amount to exceed the recoverable amount.

business Divisions Assumptionchange required for carrying amount

to equal the recoverable amount

2018%

2017%

1 January 2017

%

OthersSales growth rate (average of next 5 years) 0.7 0.4 0.4

(b) No sensitivity analysis was disclosed for the remaining CGUs as the Group believes that any reasonable possible change in the key assumptions is unlikely to result in any material impairment to the CGUs.

Key estimate and judgement: impairment of goodwill

Determination of potential impairment requires an estimation of the recoverable amount of the CGUs to which goodwill are allocated. Key assumptions made to the projected cash flows requiring judgement include growth rate estimates and discount rates.

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c3 Amounts due from related parties

group 2018$’000

2017$’000

1 January2017$’000

Trade: Associates 2,509 2,955 7,650 Joint ventures 1,952 4,462 4,687 Related corporations 10,425 20,016 10,795

14,886 27,433 23,132Non-trade: Joint ventures * 25,130 5,579 6,292 Related corporations 182 65 –

25,312 5,644 6,292

40,198 33,077 29,424Receivable: Within 1 year 35,392 28,271 24,618 After 1 year 4,806 4,806 4,806

40,198 33,077 29,424

There were no significant amounts due from related parties denominated in currencies other than the functional currencies of the Group as at 31 December 2018, 31 December 2017 and 1 January 2017.

* Included in the amounts due from joint ventures (non-trade) are:

(a) a loan of $4,806,000 bearing interest at 6.38% per annum, which is the effective interest rate. The loan is unsecured and repayable by 2029; and

(b) loans of $19,806,000 as at 31 December 2018 bearing interest at 3.49% per annum, which is the effective interest rate. The loan is unsecured and repayable by 2019.

c4 inventories

group 2018$’000

2017$’000

1 January2017$’000

Inventories of equipment and spares 1,183,510 1,082,356 1,067,365

In 2018, raw materials, consumables and changes in finished goods and work-in-progress recognised as cost of sales amounted to $4,919,045,000 (2017: $4,828,179,000). This includes inventories that were reclassified as contract assets and subsequently expensed in the course of fulfilling performance obligations in contracts with customers.



c4 inventories (continued)

Allowance for inventory obsolescence

As at 31 December 2018, the inventories are stated after allowance for inventory obsolescence of $383,486,000 (2017: $366,574,000; 1 January 2017: $356,651,000).


Inventories are measured at the lower of cost and net realisable value. Cost (comprising direct labour, material costs, direct expenses and an appropriate allocation of production overheads) is calculated on a first-in, first-out basis or weighted average cost basis depending on the nature and pattern of use of the inventories.

Cost may also include transfers from equity on qualifying cash flow hedges of foreign currency purchases of inventories. Allowance is made for deteriorated, damaged, obsolete and slow-moving inventories.

Net realisable value represents the estimated selling price in the ordinary course of business, less estimated costs to sell.

Key estimate and judgement: Allowance for inventory obsolescence

The allowance for inventory obsolescence is based on estimates from historical trends and expected utilisation of inventories. The actual amount of inventory write-offs could be higher or lower than the allowance made.

c5 trade receivables

group 2018$’000

2017$’000

1 January2017$’000

Gross receivables 1,170,064 982,499 1,111,877Allowance for doubtful debts (32,248) (41,774) (48,363)trade receivables, net 1,137,816 940,725 1,063,514

Trade receivables denominated in currencies other than the functional currencies of the Group as at 31 December are as follows:

• $231,057,000(2017:$189,620,000;1January2017:$236,755,000)denominatedinUSD• $22,092,000(2017:$35,920,000;1January2017:$36,458,000)denominatedinEuro

Trade receivables amounting to $4,319,000 (2017: $2,571,000; 1 January 2017: $7,461,000) are arranged to be repaid through letters of credit issued by reputable banks.

In the prior years, a subsidiary within the Group had not recognised trade receivable (2017: $13,985,000; 1 January 2017: $16,500,000) due from one of its customers in view of uncertainty over the collectability of the debts. During the year, the amount has been fully recognised in the financial statements under trade receivables.

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c6 Advances and other receivables


2017$’000

1 January2017$’000

Deposits 14,719 18,669 20,495Interest receivables 758 5,280 7,047Other recoverables 48,963 38,508 30,302Non-trade receivables 18,307 18,889 38,124Advance payments to suppliers 113,665 135,606 178,303Prepayments 67,913 66,474 57,268Derivative financial instruments C15 6,565 20,501 4,048Housing and car loans and advances to staff 2,642 2,836 3,074Loans to third parties 503 167 179

274,035 306,930 338,840

Receivable: Within 1 year 253,961 286,524 336,306 After 1 year 20,074 20,406 2,534

274,035 306,930 338,840

c7 bank balances and other liquid funds

group 2018$’000

2017$’000

1 January2017$’000

Fixed deposits with financial institutions 65,532 371,724 530,811Cash and bank balances 350,248 627,279 374,079Bank balances and other liquid funds 415,780 999,003 904,890Deposits pledged (1,380) (1,389) (1,258)Cash and cash equivalents in the

statement of cash flows 414,400 997,614 903,632

Fixed deposits with financial institutions mature at varying periods within 12 months (2017: 12 months; 1 January 2017: 12 months) from the financial year-end. Interest rates range from 1.1% to 6.4% (2017: 0% to 3.75%; 1 January 2017: 0% to 6.5%) per annum, which are also the effective interest rates.

Cash and bank balances of $1,380,000 (2017: $1,389,000; 1 January 2017: $1,258,000) have been placed with banks as security for letters of credit issued to third parties. Cash and cash equivalents denominated in currencies other than the functional currencies of the Company and its subsidiaries as at 31 December are as follows:




c8 trade payables and accruals


2017$’000

1 January2017$’000

Trade payables 885,441 736,075 822,022Non-trade payables 72,494 84,696 91,181Purchase of property, plant and equipment 41 1,546 1,433Accrued operating expenses * 922,772 882,594 890,136Accrued interest payable 8,064 16,554 17,651Derivative financial instruments C15 21,291 10,117 50,103

1,910,103 1,731,582 1,872,526Payable: Within 1 year 1,829,758 1,599,739 1,734,763 After 1 year 80,345 131,843 137,763

1,910,103 1,731,582 1,872,526

Trade payables denominated in currencies other than the functional currencies of the Company and its subsidiaries as at 31 December are as follows:


* Included in the accrued operating expenses is an amount of $323,849,000 (2017: $349,079,000; 1 January 2017: $375,170,000) for the Group’s obligations under its employee compensation schemes.

c9 Amounts due to related parties

group 2018$’000

2017$’000

1 January2017$’000

Trade: Associates 7,289 8,166 3,784 Joint ventures 252 244 22,450 Related corporations 3,869 2,372 2,166

11,410 10,782 28,400Non-trade: Joint ventures * 73,824 93,246 – Related corporations 211 31 7

74,035 93,277 7

85,445 104,059 28,407

Payable: Within 1 year 85,445 104,042 28,390 After 1 year – 17 17

85,445 104,059 28,407

There were no significant amounts due to related parties denominated in currencies other than the functional currencies of the Company and its subsidiaries as at 31 December 2018, 31 December 2017 and 1 January 2017.

* Included in the amounts due to joint ventures (non-trade) is an amount of $69,786,000 (2017: $76,363,000; 1 January 2017: Nil) placed by joint ventures to a subsidiary of the Group under a cash pooling arrangement, where an effective interest of 1.36% per annum is charged on the outstanding balance.

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c10 Provisions

Movements in provisions are as follows:

group Warranties$’000

onerouscontracts

$’000

closurecosts$’000

total$’000

2018At 1 January 2018 197,350 62,363 433 260,146Charged/(written-back) to profit or loss 995 (1,290) 2,191 1,896Provision utilised (26,850) (21,494) – (48,344)Deconsolidation/disposal of subsidiaries (663) – – (663)Translation difference 483 (509) (74) (100)At 31 December 2018 171,315 39,070 2,550 212,935

2017At 1 January 2017 198,847 70,313 11,606 280,766Charged to profit or loss 33,056 16,887 – 49,943Provision utilised (32,382) (24,820) (11,173) (68,375)Translation difference (2,171) (17) – (2,188)At 31 December 2017 197,350 62,363 433 260,146


Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of past events, it is probable that an outflow of resources will be required to settle the obligation and a reliable estimate of the amount can be made.

(i) Warranties

The warranty provision represents the best estimate of the Group’s contractual obligations at the reporting date.

Under the terms of the revenue contracts with key customers, the Group is obligated to make good, by repair or replacement, engineering or manufacturing defects that become apparent within the warranty period from the date of sale. The warranty obligation varies from 60 days to 15 years. The Group’s experience of the proportion of its products sold that requires repair or replacement differs from year to year as every contract is customised to the specification of the customers.

The estimation of the provision for warranty expenses is based on the Group’s past claim experience over the duration of the warranty period and the industry average in relation to warranty exposures and represents the best estimates of the costs expected to incur per dollar of sales.

The warranty provision made as at 31 December 2018 is expected to be incurred over the applicable warranty periods.



c10 Provisions (continued)

recognition and measurement (continued)

(ii) Onerous contracts

Provision for onerous contracts on uncompleted contracts is recognised immediately in profit or loss when it is determinable.

(iii) Closure costs

Provision for closure costs is made in respect of the expected costs that the Group will undertake between the cessation of certain operations of the Group to the completion of their liquidation.

Key estimate and judgement: Provision for warranty

The provision for warranty is based on estimates from known and expected warranty work to be performed after completion. The warranty expense incurred could be higher or lower than the provision made.

Key estimate and judgement: Provision for onerous contracts

The Group conducts a critical review of all its long-term contracts regularly. Allowance is made where necessary to account for onerous contracts and significant judgement is used to estimate the total cost to complete.

c11 Deferred income

group 2018$’000

2017$’000

1 January2017$’000

Government compensation – 25,434 31,154Government grants 37,466 37,230 41,997Deferred rents 8,700 7,122 2,294

46,166 69,786 75,445

Recognise: Within 1 year 3,761 630 – After 1 year 42,405 69,156 75,445

46,166 69,786 75,445

Government compensation and grants relate mainly to grants received to subsidise the cost of capital assets.

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c12 contract balances

The following table provides information about contract assets and contract liabilities from contracts with customers.

group 2018$’000

2017$’000

1 January2017$’000

Contract assets 1,070,396 939,073 968,608Contract liabilities (1,819,546) (1,780,034) (1,875,024)

The timing of revenue recognition, billings and cash collections results in billed accounts receivable (included in trade receivables), unbilled receivables (contract assets), and customer advances (contract liabilities) on the balance sheet.

The contract assets primarily relate to the Group’s rights to consideration for work completed but not billed at the reporting date. If the value of services rendered exceeds payments received from the customer, a contract asset is recognised and presented separately. The contract asset is transferred to receivables when the entitlement to payment becomes unconditional.

The contract liabilities primarily relate to advance consideration received from customers for contract revenue. If the amounts invoiced to the customer exceeds the value of services rendered, a contract liability is recognised and presented separately.

These assets and liabilities are reported on the balance sheet on a contract by contract basis at the end of each reporting period.

Significant changes in the contract assets and the contract liabilities balances during the year are as follows:

contract assets contract liabilities

group 2018$’000

2017$’000

2018$’000

2017$’000

Revenue recognised that was included in the contract liability balance at the beginning of the year – – 530,126 514,185

Increase due to cash received, excluding amounts recognised as revenue during the year – – (591,971) (537,792)

Contract assets recognised 774,994 251,414 – –Contract asset reclassified to trade receivables (610,114) (232,075) – –Changes in measurement of progress 4,804 (6,403) – –



c12 contract balances (continued)

transaction price allocated to the remaining performance obligations

The aggregate amount of transaction price allocated to the remaining performance obligations as at 31 December 2018 is $13,183,505,000 and the Group expects to recognise $4,944,523,000 as revenue relating to the unsatisfied (or partially unsatisfied) performance obligations in 2019 with the remaining $8,238,982,000 in 2020 and beyond.

Variable consideration that is constrained and therefore not included in the transaction price is excluded in the amount presented above.

As permitted under the transitional provisions in SFRS(I) 15, the transaction price allocated to partially or fully unsatisfied performance obligations as of 31 December 2017 is not disclosed.

Key estimate and judgement: contract balances

Significant judgements are used to estimate these total contract costs to complete. In making these estimates, management has relied on past experience of completed projects. The estimated total contract costs are reviewed every reporting period and adjusted where necessary, with the corresponding effect of change being recognised prospectively from the date of change.

c13 Financial risk management objectives and policies

The Group has exposure to the following financial risks arising from its operations and the use of financial instruments:

• Interestrate• Foreignexchange• Market• Liquidity• Credit

The Group’s principal financial instruments, other than foreign exchange contracts and derivatives, comprise bank guarantees, performance bonds, bank loans and overdrafts, finance leases and hire purchase contracts, investments, cash and short-term deposits.

All financial transactions with the banks are governed by banking facilities duly accepted with Board of Directors’ resolutions, with banking mandates, which define the permitted financial instruments and facilities limits. All financial transactions require dual signatories. The Group has various other financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations.

It is the Group’s policy not to engage in foreign exchange and/or derivatives speculation. The purpose of engaging in treasury transactions is solely for hedging. The Group’s treasury mandates allow only foreign exchange spot, forward or non-deliverable forward, foreign exchange swap, cross currency swap, purchase of foreign exchange call, put or collar option, forward rate agreement, interest rate swap, purchase of interest rate cap, floor or collar option (Permitted Transactions). These instruments are generic in nature with no embedded or leverage features and any deviation from these instruments would require specific approval from the Board of Directors.

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c13 Financial risk management objectives and policies (continued) The policies for managing each of these risks are broadly summarised below:

interest rate risk

As at reporting date, the interest rate profile of the interest-bearing financial instruments is:

group 2018$’000

2017$’000

1 January2017$’000

Fixed rate instrumentsFinancial assets 90,144 376,530 535,617Financial liabilities (250,835) (818,211) (850,380)

(160,691) (441,681) (314,763)Variable rate instrumentsFinancial assets – 350,975 499,812Financial liabilities (314,654) (297,853) (229,895)

(314,654) 53,122 269,917

The Group has cash balances placed with reputable banks and financial institutions. The Group manages its interest rate risk on its interest income by placing the cash balances in varying maturities and interest rate terms with due consideration to operating cash flow requirements and optimising yield.

The Group’s debts include bank loans and lease commitments (2017: 10-year bonds issued, bank loans and lease commitments). The Group seeks to minimise its interest rate risk exposure through tapping different sources of funds to refinance the debt instruments and/or enter into interest rate swaps and cross currency interest rate swaps.

An increase/decrease of 50 basis points in interest rate, with all other variables being held constant, would lead to a reduction/increase of the Group’s profit or loss by approximately $1.6 million (2017: $1.5 million).

Information relating to the Group’s interest rate risk exposure is also disclosed in the notes on the Group’s borrowings, investments and loans receivable, where applicable.

Foreign exchange risk

The Group is exposed to foreign exchange risk from its global operations and revenues, costs and borrowings denominated in a currency other than the respective functional currencies of the Company and its subsidiaries. The Group’s foreign exchange exposures are primarily from USD and Euro, and manages its exposure through forward currency contracts, cross currency interest rate swaps and embedded derivatives.

The Group’s centralised Treasury Unit monitors the current and projected foreign currency cash flow within the Group and aims to reduce the exposure of the net position by transacting with the banks where appropriate.

No foreign exchange sensitivity analysis was disclosed as a reasonable change in the exchange rate would not result in any significant impact on the Group’s results.



c13 Financial risk management objectives and policies (continued)

market risk

The Group has strategic investments in quoted and unquoted equity shares. The market value of these investments will fluctuate with market conditions.

No sensitivity analysis was disclosed as a reasonable change in the market value of these investments would not result in any significant impact on the Group’s results.

liquidity risk

To manage liquidity risk, the Group monitors its net operating cash flows and maintains an adequate level of cash and cash equivalents and secured committed funding facilities from financial institutions. In assessing the adequacy of these funding facilities, management reviews its working capital requirements regularly.

The table below analyses the maturity profile of the Group’s financial liabilities based on the contractual undiscounted cash flows including estimated interest payments and excluding impact of netting arrangements.

groupcontractual

cash flow $’000

Within1 year$’000

between 1 and 5 years

$’000

more than5 years

$’000

2018Bank loans (499,291) (231,435) (230,210) (37,646)Lease obligations (24,825) (1,181) (4,488) (19,156)Trade and other payables (1,974,257) (1,893,912) (75,058) (5,287)Derivative financial instruments:• Gross-settledforward

currency contracts- payments (1,191,268) (601,037) (590,231) –- receipts 1,178,865 592,641 586,224 –

• Net-settledinterestrateswaps 2,231 1,479 752 –Financial guarantees (87,921) (2,384) (19,239) (66,298)

2017Bank loans (439,014) (217,399) (206,407) (15,208)Bonds (718,058) (32,088) (685,970) –Other loans (7,418) (7,403) (15) –Lease obligations (32,524) (1,280) (4,590) (26,654)Trade and other payables (1,825,524) (1,693,664) (129,244) (2,616)Derivative financial instruments:• Gross-settledforward

currency contracts- payments (1,291,846) (697,921) (587,116) (6,809)- receipts 1,312,620 709,860 596,041 6,719

• Net-settledinterestrateswaps 2,769 441 2,328 –• Net-settledcrosscurrency

interest rate swaps 8,624 1,529 7,095 –Financial guarantees (84,856) (7) (18,108) (66,741)

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c13 Financial risk management objectives and policies (continued) Except for the cash flows arising from the intra-group financial guarantee, it is not expected that the cash flows

included in the maturity analysis could occur significantly earlier, or at significantly different amounts.

At the reporting date, the Group does not consider it probable that a claim will be made against the Group under the financial guarantees.


Financial guarantees issued by the Group to joint ventures are recognised initially at fair value and are classified as financial liabilities. Subsequent to initial measurement, the financial guarantees are stated at the higher of the initial fair value less cumulative amortisation and the amount that would be recognised if they were accounted for as contingent liabilities.

When financial guarantees are terminated before their original expiry date, the carrying amount of the financial guarantee is transferred to profit or loss.

credit risk

Credit risk is managed through the application of credit approvals, credit limits and monitoring procedures. Where appropriate, the Company or its subsidiaries obtain collaterals from customers or arrange master netting agreements. Cash terms, advance payments, and letters of credit or bank guarantees are required for customers of lower credit standing.

The carrying amounts of financial assets and contract assets represent the Group’s maximum exposures to credit risk, before taking into account any collateral held.

group 2018$’000

2017$’000

1 January2017$’000

Investments 16,814 360,703 510,941Derivative financial instruments, non-current 11,483 33,082 32,967Contract assets 1,070,396 939,073 968,608Trade receivables 1,138,988 940,725 1,065,408Amounts due from related parties 40,198 33,077 29,424Advances and other receivables 92,457 104,850 103,269Bank balances and other liquids funds 415,780 999,003 904,890

2,786,116 3,410,513 3,615,507

Impairment losses on financial assets and contract assets recognised in profit or loss are as follows:

group 2018$’000

2017$’000

Trade receivables 1,612 16,628Contract balances arising from contracts with customers 5,793 (1,113)

7,405 15,515




exposure to credit risk

As at 31 December 2018, 26% (2017: 35%) of trade debts relate to three major customers of the Group.

The table below analyses the trade receivables and contract assets by the Group’s main reportable segments:

carrying amount

group 2018$’000

2017$’000

1 January 2017$’000

Aerospace 780,856 642,977 694,602Electronics 1,040,822 815,805 876,361Land Systems 269,770 218,001 276,286Marine 108,768 195,552 165,334Others 9,168 7,463 21,433

2,209,384 1,879,798 2,034,016

A summary of the Group’s exposures to credit risk for trade receivables and contract assets is as follows:

2018

groupnot credit

impaireds$’000

credit impaired

s$’000

Receivables measured at lifetime ECL:Trade receivables and contract assets 2,209,384 38,986Loss allowance – (38,986)total 2,209,384 –

comparative information under Frs 39

The age analysis of trade receivables and contract assets as at 31 December 2017 and 1 January 2017 are as follows:

group 2017$’000

1 January2017$’000

Not past due 1,614,814 1,712,6081 – 90 days 217,759 257,81291 – 180 days 35,927 34,511181 – 360 days 10,462 28,351> 360 days 836 734total gross carrying amount 1,879,798 2,034,016

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c13 Financial risk management objectives and policies (continued) expected credit loss assessment

Trade receivables and contract assets

The Group uses an allowance matrix to measure the expected credit loss (ECL) of trade receivables and contract assets from its customers as there is no applicable credit ratings (or equivalent).

Loss rates are calculated using a ‘roll rate’ method based on the probability of a receivable progressing through successive stages of delinquency to write-off. Roll rates are calculated separately for exposures in different segments based on the common credit risk characteristics.

The following table provides information about the exposure to credit risk and ECLs for trade receivables and contract assets for customers:

group

Weightedaverage loss rate

gross carryingamount

$’000

impairment loss allowance

$’000

credit impaired

Not past due 0.55% 1,807,360 (9,860) No1 – 90 days 0.57% 338,958 (1,927) No91 – 180 days 2.07% 64,920 (1,347) No181 – 360 days 31.81% 10,902 (3,468) No> 360 days 85.34% 26,230 (22,384) Yes

2,248,370 (38,986)

Loss rates are based on actual credit loss experience over the past four years adjusted for current conditions and the Group’s view of economic conditions over the expected lives of the receivables only if these factors have a significant impact to the credit loss. As of 2018, no scalar factors has been applied.

movements in allowance for impairment in respect of trade receivables and contract assets

The movements in the allowance for impairment in respect of trade receivables and contract assets during the year were as follows:

groupindividual

impairments$’000

collectiveimpairments

$’000

At 1 January 2017 per FRS 39 45,850 4,781Impairment loss/(write-back of impairment) recognised 15,870 (355)Amounts written off (20,598) –Acquisition of subsidiary 75 3Translation difference (1,838) (218)At 31 December 2017 per FRS 39 39,359 4,211




group lifetime ecl

$’000

At 1 January 2018 per FRS 39 43,570Adjustment on initial application of SFRS(I) 9 4,196At 1 January 2018 per SFRS(I) 9 47,766Impairment loss recognised 7,405Amounts written off (4,594)Disposal of subsidiaries (11,048)Translation difference (543)At 31 December 2018 per SFRS(I) 9 38,986

Bank balances and other liquid funds

Bank balances and other liquid funds are placed with financial institutions, which mainly have long-term rating of A3 by Moody’s or A- by Standard & Poor’s or the equivalent by a reputable credit rating agency. Impairment on bank balances and other liquid funds has been measured on the 12-month expected loss basis and reflects the short maturities of the exposures. The Group considers that its bank balances and other liquid funds to have low credit risk based on the external credit ratings of the counterparties. The amount of the allowance on bank balances and other liquid funds is insignificant.

Other financial assets

Other financial assets comprise amounts due from related parties and other receivables, which are mostly short-term in nature. Impairment on other financial assets has been measured on the 12-month expected loss basis and reflects the short maturities of the exposures. The Group considers its other financial assets to have low credit risk and the amount of the allowance on other financial assets is insignificant.

Policy under sFrs(i) 9 – Policy applicable from 1 January 2018

The Group recognises loss allowances for ECLs on financial assets measured at amortised cost, contract assets (as defined in SFRS(I)15), debt investments at FVOCI and financial guarantee contracts, but not for equity investments.

The Group measures loss allowances at an amount equal to lifetime ECL.

Lifetime ECLs are the ECLs that result from all the possible default events over the expected life of a financial instrument.

The Group considers a financial asset to be in default when:

• theborrowerisunlikelytopayitscreditobligationstotheGroupinfull,withoutrecoursebytheGrouptoactions such as realising security (if any is held); or

• thefinancialassetremainsoutstandingformorethanthereasonablerangeofpastduedays,takingintoconsideration historical payment track record, current macroeconomics situation as well as general industry trend.

Credit-impaired financial assets

At each reporting date, the Group assesses whether financial assets carried at amortised cost and debt investments at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

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Policy under sFrs(i) 9 – Policy applicable from 1 January 2018 (continued)

Evidence that a financial asset is credit-impaired includes the following observable data:

• significantfinancialdifficultyoftheborrowerorissuer;

• abreachofcontractsuchasadefaultorpayment remainsoutstanding formore than the reasonable range of past due days;

• therestructuringofaloanoradvancebytheGroupontermsthattheGroupwouldnotconsiderotherwise;

• itisprobablethattheborrowerwillenterbankruptcyorotherfinancialreorganisation;or

• thedisappearanceofanactivemarketforasecuritybecauseoffinancialdifficulties.

Presentation of allowance for ECL in the balance sheets

Loss allowances for financial assets measured at amortised cost and contract assets are deducted from the gross carrying amounts of these assets.

Write-off

The gross carrying amount of a financial asset is written off (either partially or in full) to the extent that there is no realistic prospect of recovery. This is generally the case when the Group determines that the debtor does not have assets or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group’s procedures for recovery of amounts due.

Policy under Frs 39 – Policy applicable before 1 January 2018

The Group assesses at the end of each reporting period whether there is objective evidence that a financial asset not carried at FVTPL is impaired.

To determine whether there is objective evidence that financial assets (including equity securities) are impaired, the Group considers factors such as the probability of insolvency or significant financial difficulties of the debtor/issuer, default or significant delay in payments, significant adverse changes in the business environment where the debtor/issuer operates and disappearance of an active market for a security. If there is objective evidence that an impairment loss on an unquoted equity instrument that is not carried at fair value because its fair value cannot be reliably measured, or on a derivative asset that is linked to and must be settled by delivery of such an unquoted equity instrument has been incurred, the amount of the loss is measured as the difference between the asset’s carrying amount and the present value of estimated future cash flows discounted at the current market rate of return for a similar financial asset. The loss recognised is not reversed in future periods.

In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below its cost is objective evidence of impairment. Impairment losses previously recognised are reversed through OCI and for available-for-sale debt instruments are reversed through the profit and loss, if the increase in fair value is related objectively to a subsequent event.

Key estimate and judgement: impairment of financial assets and contract assets

Impairment of financial assets and contract assets are estimated based on historical loss experience for assets with similar credit risk characteristics. The estimated ECL is reviewed every reporting period and adjusted where necessary, with the corresponding effect of change being recognised prospectively from the date of change.




c14 classification and fair value of financial instruments

carrying amount carrying amount Fair value

groupAmortised

cost$’000

mandatorily at FVtPl

$’000

Fair value –hedging

instruments$’000

FVoci – equity

instruments$’000

other financial liabilities

$’000

total carrying amount

$’000level 1

$’000level 2

$’000level 3

$’000total$’000

31 December 2018

Financial assets measured at fair value

Investments – – – 16,814 – 16,814 422 16,392 – 16,814

Associates – 23,698 – – – 23,698 – 23,698 – 23,698

Derivative financial instruments – 5,728 12,320 – – 18,048 – 18,048 – 18,048

– 29,426 12,320 16,814 – 58,560 422 58,138 – 58,560

Financial assets not measured at fair value

Trade receivables 1,138,988 – – – – 1,138,988

Amounts due from related parties 40,198 – – – – 40,198

Advances and other receivables 85,892 – – – – 85,892

Bank balances and other liquid funds 415,780 – – – – 415,780

1,680,858 – – – – 1,680,858

Financial liabilities measured at fair value

Derivative financial instruments – (3,057) (38,076) – – (41,133) – (41,133) – (41,133)

Financial liabilities not measured at fair value

Creditors and accruals – – – – (1,888,812) (1,888,812)

Amounts due to related parties – – – – (85,445) (85,445)

Borrowings – – – – (495,779) (495,779)

– – – – (2,470,036) (2,470,036)

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c14 classification and fair value of financial instruments


groupAmortised

cost$’000

mandatorily at FVtPl

$’000

Fair value –hedging

instruments$’000

FVoci – equity

instruments$’000

other financial liabilities

$’000


$’000level 1

$’000level 2

$’000level 3

$’000total$’000

31 December 2018


Investments – – – 16,814 – 16,814 422 16,392 – 16,814

Associates – 23,698 – – – 23,698 – 23,698 – 23,698

Derivative financial instruments – 5,728 12,320 – – 18,048 – 18,048 – 18,048

– 29,426 12,320 16,814 – 58,560 422 58,138 – 58,560






1,680,858 – – – – 1,680,858


Derivative financial instruments – (3,057) (38,076) – – (41,133) – (41,133) – (41,133)


Creditors and accruals – – – – (1,888,812) (1,888,812)

Amounts due to related parties – – – – (85,445) (85,445)

Borrowings – – – – (495,779) (495,779)

– – – – (2,470,036) (2,470,036)



c14 classification and fair value of financial instruments (continued)


grouploans and

receivables$’000

Fair valuethrough

profit or loss$’000

Available-for-sale

$’000

liabilities atamortised

cost$’000

Derivatives used for hedging

$’000


$’000level 1

$’000level 2

$’000level 3

$’000total$’000

31 December 2017


Investments – – 351,344 – – 351,344 357 350,975 12 351,344

Associates – 7,863 – – – 7,863 – 7,863 – 7,863

Derivative financial instruments – 18,247 – – 35,336 53,583 – 53,583 – 53,583

– 26,110 351,344 – 35,336 412,790 357 412,421 12 412,790


Investments – – 9,359 – – 9,359

Trade receivables 940,725 – – – – 940,725




2,057,154 – 9,359 – – 2,066,513


Derivative financial instruments – (3,459) – – (22,211) (25,670) – (25,670) – (25,670)


Creditors and accruals – – – (1,721,465) – (1,721,465)

Amounts due to related parties – – – (104,059) – (104,059)

Borrowings – – – (1,116,064) – (1,116,064)

– – – (2,941,588) – (2,941,588)

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grouploans and

receivables$’000

Fair valuethrough


Available-for-sale

$’000


cost$’000


$’000


$’000level 1

$’000level 2

$’000level 3

$’000total$’000

31 December 2017


Investments – – 351,344 – – 351,344 357 350,975 12 351,344

Associates – 7,863 – – – 7,863 – 7,863 – 7,863


– 26,110 351,344 – 35,336 412,790 357 412,421 12 412,790


Investments – – 9,359 – – 9,359

Trade receivables 940,725 – – – – 940,725




2,057,154 – 9,359 – – 2,066,513




Creditors and accruals – – – (1,721,465) – (1,721,465)


Borrowings – – – (1,116,064) – (1,116,064)

– – – (2,941,588) – (2,941,588)





grouploans and

receivables$’000

Fair valuethrough


Available-for-sale

$’000


cost$’000


$’000


$’000level 1

$’000level 2

$’000level 3

$’000total$’000

1 January 2017


Investments – 364 500,463 – – 500,827 1,003 499,812 12 500,827


– 29,258 500,463 – 8,121 537,842 1,003 536,827 12 537,842


Investments – – 10,114 – – 10,114





2,098,943 – 10,114 – – 2,109,057




Trade payables and accruals – – – (1,822,423) – (1,822,423)


Borrowings – – – (1,080,275) – (1,080,275)

– – – (2,931,105) – (2,931,105)

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grouploans and

receivables$’000

Fair valuethrough


Available-for-sale

$’000


cost$’000


$’000


$’000level 1

$’000level 2

$’000level 3

$’000total$’000

1 January 2017


Investments – 364 500,463 – – 500,827 1,003 499,812 12 500,827


– 29,258 500,463 – 8,121 537,842 1,003 536,827 12 537,842


Investments – – 10,114 – – 10,114





2,098,943 – 10,114 – – 2,109,057




Trade payables and accruals – – – (1,822,423) – (1,822,423)


Borrowings – – – (1,080,275) – (1,080,275)

– – – (2,931,105) – (2,931,105)



(a) non-derivative financial assets and liabilities

Policy under sFrs(i) 9 – Policy applicable from 1 January 2018

classification and subsequent measurement

On initial recognition, a financial asset is classified as measured at: amortised cost; FVOCI – debt investment; FVOCI – equity investment; or FVTPL.

Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

Financial assets classification subsequent measurement

Amortised cost The asset is held within a business model whose objective is to hold assets to collect contractual cash flows; and

The contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Measured at amortised cost using the effective interest method. The amortised cost is reduced by impairment losses. Interest income, foreign exchange gains and losses and impairment are recognised in profit or loss. Any gain or loss on derecognition is recognised in profit or loss.

Debt investments at FVOCI

The asset is held within a business model whose objective is achieved by collecting contractual cash flows and selling financial assets; and

The contractual terms of the asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

Measured at fair value. Interest income calculated using the effective interest method, foreign exchange gains and losses and impairment are recognised in profit or loss. Other net gains and losses are recognised in OCI. On derecognition, gains and losses accumulated in OCI are reclassified to profit or loss.

Equity investments at FVOCI

On initial recognition of an equity investment that is not held-for-trading, the Group may irrevocably elect to present subsequent changes in the investment’s fair value in OCI. This election is made on an investment-by-investment basis.

Measured at fair value. Dividends are recognised as income in profit or loss unless the dividend clearly represents a recovery of part of the cost of the investment. Other net gains and losses are recognised in OCI and are never reclassified to profit or loss.

FVTPL* All other financial assets are classified as measured at FVTPL. Financial assets that are held-for-trading or are managed, and whose performance is evaluated on a fair value basis, are measured at FVTPL.

* On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI, as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Measured at fair value. Net gains and losses, including any interest or dividend income, are recognised in profit or loss.


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(a) non-derivative financial assets and liabilities (continued)

Business model assessment

The Group makes an assessment of the objective of a business model in which an asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to management. The information considered includes:

• Thestatedpoliciesandobjectivesfortheportfolioandtheoperationofthosepoliciesinpractice;• HowtheperformanceoftheportfolioisevaluatedandreportedtotheGroup’smanagement;• Therisksthataffecttheperformanceofthebusinessmodelandhowthoserisksaremanaged;• Howmanagersoftheportfolioarecompensated;and• Thefrequency,volumeandtimingofdisposalsinpriorperiods,thereasonsforsuchdisposalsand

its expectations about future activity.

Assessment of whether contractual cash flows are solely payments of principal and interest

For assessment purposes, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as profit margin.

In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers contingent events, leverage features, modifications of the time value of money and other limiting terms in the contractual terms of the instrument, which change the timing or amount of contractual cash flows such that the cash flows of the instrument would not be reflective of solely payments of principal and interest.

Reclassifications

Financial assets are not reclassified subsequent to their initial recognition, except in the period after the Group changes its business model for managing those financial assets.

Financial liabilities

The Group classifies its financial liabilities, other than financial guarantees and loan commitments, as measured at amortised cost or FVTPL.

Policy under Frs 39 – Policy applicable before 1 January 2018

recognition and initial measurement

Financial assets and liabilities are recognised on the balance sheet when, and only when, the Group becomes a party to the contractual provisions of the financial instrument. All regular way purchases and sales of financial assets are recognised on the trade date, i.e. the date that the Group commits to purchase or sell the asset.




(a) non-derivative financial assets and liabilities (continued)

Policy under Frs 39 – Policy applicable before 1 January 2018 (continued)

classification and subsequent measurement

category subsequent measurement

loans and receivables- With fixed or determinable payments,

that are not quoted in an active market- Comprise bank balances and other liquid

funds, and trade and other receivables (including finance lease receivables and amounts due from related parties)

Amortised cost, computed using effective interest method, less impairment losses.

Fair value through profit or loss- Acquired principally for the purposes of

selling in the near term - Includes separable embedded derivatives

and other derivatives not designated in hedging relationship

- Investments in associates acquired by the Group’s Corporate Venture Unit which are designated upon initial recognition to be measured at fair value through profit or loss

Gains and losses arising from fair value changes are recognised in profit or loss.

Fair value gains/losses arising from embedded derivatives and forward currency contracts that provide an economic hedge to trading transactions, are considered to be part of the Group’s operating activities and are classified as part of cost of sales to reflect the nature of the transactions.

Available-for-sale - Designated or are not classified in the other

categories of financial assets - Comprise equity securities and bonds

Gains and losses arising from changes in fair value are recognised in other comprehensive income and presented in fair value reserve in equity, until the investment is disposed of or is determined to be impaired, at which time, the cumulative gain or loss previously recognised in reserve is included in profit or loss for the year.

For those financial assets where there is no active market and where fair value cannot be reliably measured, they are measured at cost.

liabilities at amortised cost- Comprise bank overdrafts, trade and other

payables (including lease obligations and amounts due to related parties) and borrowings

Amortised cost, computed using effective interest method.

Derecognition

Financial assets

The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or when it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

Financial liabilities

The Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire.


212 ST ENGINEERING


(b) Fair value

The Group has an established approach with respect to the measurement of fair values.

Fair value hierarchy

The Group classifies fair value measurement using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The following table shows the levels of fair value hierarchy and the respective valuation technique used in measuring the fair values, as well as significant unobservable inputs:

types of financial instruments Valuation method

level 1 FVoci- Equity investments (quoted)

Determined by reference to their quoted bid prices for these investments as at reporting date.

Fair value through profit or loss- Equity investments (quoted)

level 2 FVoci- Bonds (unquoted)- Equity investments (unquoted)

Determined based on quoted market prices.Determined by reference to the most recent purchase price.

Derivatives- Forward currency contracts- Cross currency interest

rate swaps- Interest rate swaps- Embedded derivatives

Determined based on broker quotes. Similar contracts are traded in an active market and the quotes reflect the actual transactions in similar instruments.

FVtPl- Investment in associate

Determined by reference to the most recent purchase price.

level 3 FVoci- Venture capital funds and

limited partnership

Determined by reference to valuation provided by non-related fund managers based on non-observable data. Changing one or more of the inputs to reasonable alternative assumptions is not expected to have a material impact on the changes in fair value.

measurement of fair values

The Group regularly reviews significant unobservable inputs and valuation adjustments. If third party information, such as broker quotes or pricing services, is used to measure fair value, then the Group assesses and documents the evidence obtained from the third parties to support the conclusion that such valuations meet the requirements of SFRS(I)s, including the level in the fair value hierarchy the resulting fair value estimate should be classified.

The Group recognises transfers between levels of the fair value hierarchy as of the end of the reporting period during which the change has occurred. There were no transfers between Level 1, Level 2 and Level 3 during 2018 and 2017.




(b) Fair value (continued)

Movements in level 3 financial instruments measured at fair value

The following table presents the reconciliation for all financial instruments measured at fair value based on significant unobservable inputs (Level 3).

group 2018$’000

2017$’000

equity instruments (unquoted)Opening balance 12 12Total gain: - recognised in other comprehensive income (12) –Closing balance – 12

The following methods and assumptions are used to estimate the fair value of other classes of financial instruments:

types of financial instruments Valuation method

Bank balances, other liquid funds and short-term receivables

Carrying amounts approximate fair values due to the relatively short-term maturity of these instruments.

Short-term borrowings and other current payables

Long-term receivables Estimated based on the expected cash flows discounted to present value.

Long-term payables Estimated based on present value of future principal and interest cash flows, discounted at the market rate of interest at the reporting date.


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c15 Derivative financial instruments

cash flow hedges

At 31 December 2018, the Group held the following instruments to hedge exposures to changes in foreign currency and interest rates:

maturity

Within 1 yearbetween

1 to 5 years

2018

Foreign currency risk Nominal amount of forward exchange contracts (in thousands of SGD) 493,801 237,406- Average SGD:USD forward contract rate 1.3539 –- Average SGD:EUR forward contract rate 1.5423 1.6645- Average USD:EUR forward contract rate 1.2049 1.2251Nominal amount of embedded derivatives (in thousands of SGD) 69,832 250,421- Average SGD:USD 1.3794 1.3801- Average SGD:EUR 1.6573 1.6452- Average USD:GBP 1.7934 1.8144

interest rate risk Nominal amount of interest rate swaps – 163,914- Average fixed interest rate – 1.6273

The amounts at the reporting date relating to items designated as hedged items were as follows:

change invalue used for

calculatinghedge

ineffectiveness $’000

cash flow hedge

reserve $’000

balancesremaining in

the cash flowhedge reservefrom hedging

relationships forwhich hedge

accounting is nolonger applied

$’000

Foreign currency risk Sales (19,837) 6,090 –Receivables (481) (458) –Purchases (4,884) (1,277) –Payables 170 (20) –Embedded derivatives (8,207) (12,127) –

interest rate risk Fixed rate borrowings 794 2,831 –



c15 Derivative financial instruments (continued)

The amounts relating to items designated as hedging instruments and hedge ineffectiveness were as follows:

2018 During the year 2018

nominal amount

$’000Assets$’000

liabilities$’000

line itemin the statement

of financialposition where

the hedginginstrumentis included

$’000

changes inthe value ofthe hedging

instrumentrecognised

in oci$’000

hedgeineffectiveness

recognised inprofit or loss

$’000

line item inprofit or loss that

includes hedgeineffectiveness

$’000

Amount fromhedging reserve

transferred to cost of inventory

$’000

Amountreclassified fromhedging reserve to profit or loss

$’000

line item in profit or loss

affected by thereclassification

$’000

Foreign currency risk Forward exchange contracts 731,206 3,766 (20,734) Derivative

financialinstruments,

advances and other receivables

and trade payables and

accruals

(25,032) (201) Cost of sales/

Finance costs, net

3,955 2 Revenue/Cost of sales/

Operating expenses/

Finance costs, net

Embedded derivatives 320,253 156 (11,427) (8,207) – – – – –

interest rate risk Interest rate swaps 163,914 2,854 – Derivative

financialinstruments

794 – – – – –

216 ST ENGINEERING



The amounts relating to items designated as hedging instruments and hedge ineffectiveness were as follows:

2018 During the year 2018

nominal amount

$’000Assets$’000

liabilities$’000

line itemin the statement

of financialposition where

the hedginginstrumentis included

$’000

changes inthe value ofthe hedging

instrumentrecognised

in oci$’000

hedgeineffectiveness

recognised inprofit or loss

$’000

line item inprofit or loss that

includes hedgeineffectiveness

$’000

Amount fromhedging reserve

transferred to cost of inventory

$’000

Amountreclassified fromhedging reserve to profit or loss

$’000

line item in profit or loss

affected by thereclassification

$’000

Foreign currency risk Forward exchange contracts 731,206 3,766 (20,734) Derivative

financialinstruments,

advances and other receivables

and trade payables and

accruals

(25,032) (201) Cost of sales/

Finance costs, net

3,955 2 Revenue/Cost of sales/

Operating expenses/

Finance costs, net

Embedded derivatives 320,253 156 (11,427) (8,207) – – – – –

interest rate risk Interest rate swaps 163,914 2,854 – Derivative

financialinstruments

794 – – – – –




The following table provides a reconciliation by risk category of components of equity and analysis of OCI items, net of tax, resulting from cash flow hedge accounting:

2018hedging

reserve $’000

Balance at 1 January 20,408

Change in fair value: Foreign currency risk (33,239)Interest rate risk 794Equity accounted joint ventures 505

Amount reclassified to profit or loss: Foreign currency risk 2

Amount included in the cost of non-financial items: Foreign currency risk – inventory purchases 3,955

Tax movements on reserves during the year 7,151

Balance at 31 December (424)

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comparative information under Frs 39

Derivative financial instruments included in the balance sheet are as follows:

2017

contractual/notional amount

$’000

estimated fair value

Asset$’000

liability$’000

cash flow hedges

Forward currency contracts:- to hedge confirmed sales in foreign currencies 576,409 19,445 (4,136)- to hedge firm purchase commitments in foreign currencies 269,182 3,816 (2,533)- to hedge accounts receivable in foreign currencies 9,410 283 (15)- to hedge accounts payable in foreign currencies 12,024 254 (50)Interest rate swaps 207,235 2,035 –Embedded derivatives 322,926 5,671 (11,302)

Fair value hedges

Forward currency contracts:- to hedge confirmed sales in foreign currencies 146,880 628 (2,134)- to hedge accounts payable in foreign currencies 354 – (18)Embedded derivatives 132,321 2,551 (1,928)

non-hedging instruments

Forward currency contracts:- sales 227,002 5,082 (2,312)- purchases 67,426 2,599 (135)Cross currency interest rate swaps 124,025 10,788 –Embedded derivatives 8,137 431 (1,107)Total 53,583 (25,670)Less: Current portion (20,501) 10,117Non-current portion 33,082 (15,553)



Derivative financial instruments and hedge accounting – Policy applicable from 1 January 2018

The derivative financial instruments are initially recognised at fair value on the date on which a derivative contract is entered into. Attributable transaction costs are recognised in profit or loss as incurred. Subsequent to initial recognition, derivative financial instruments are remeasured at their fair values.

Any gains or losses arising from changes in the fair value of derivatives that do not qualify for hedge accounting are taken directly to the profit or loss.

Designation of hedges

At inception or upon reassessment of the hedge arrangement, the Group documents the relationship between hedging instrument and hedged item, and the methods that will be used to measure the effectiveness of the hedged relationship, to measure the effectiveness of the hedged relationship, as well as risk management policies and strategies in undertaking various hedged transactions.

The Group also documents its assessment, both at inception and on an ongoing basis, the economic relationship between hedging instruments and hedged item, including whether derivatives designated as hedging instruments are highly effective in offsetting changes in fair values or cash flows of the hedged item.


Cash flow hedges When a derivative is designated in a cash flow hedge, the effective portion of changes in the fair value of the derivative is recognised in other comprehensive income limited to the cumulative change in the fair value of the hedged item and presented in the fair value reserve. Any ineffective portion of changes in the fair value of the derivative (i.e. the extent to which changes in the fair value of the hedge instrument do not match the changes in fair value of the hedged item) is recognised immediately in profit or loss.

The amount accumulated in equity is retained in other comprehensive income, and depending on the nature of the hedged item, will either be transferred to the profit or loss in the same period that the underlying transaction affects profit or loss or be capitalised in the initial carrying amount of the non-financial item.

If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, hedge accounting is discontinued prospectively. The cumulative gain or loss previously recognised in the fair value reserve remains there until the forecast transaction occurs. If the forecast transaction is no longer expected to occur, then the amount accumulated in equity is reclassified to profit or loss.

Fair value hedges Changes in the fair value of derivative financial instruments that are designated and qualify as fair value hedges are recorded in profit or loss, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.


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Derivative financial instruments and hedge accounting – Policy applicable from 1 January 2018 (continued)

Designation of hedges (continued)


Net investment hedges

The Group designates certain derivatives and non-derivative financial liabilities as hedges of foreign exchange risk on a net investment in a foreign operation.

When a derivative instrument or a non-derivative financial liability is designated as the hedging instrument in a hedge of a net investment in a foreign operation, the effective portion of, for a derivative, changes in the fair value of the hedging instrument or, for a non-derivative, foreign exchange gains and losses is recognised in OCI and presented in the translation reserve within equity. Any ineffective portion of the changes in the fair value of the derivative or foreign exchange gains and losses on the non-derivative is recognised immediately in profit or loss. The amount recognised in OCI is reclassified to profit or loss as a reclassification adjustment on disposal of the foreign operation.

Derivative financial instruments and hedge accounting – Policy applicable before 1 January 2018 The policy applied in the comparative information presented for 2017 is similar to that applied for 2018. However, embedded derivatives are not separated from host contracts that are financial assets in the scope of SFRS(I) 9. Instead, the hybrid financial instrument is assessed as a whole for classification of financial assets under SFRS(I) 9. Furthermore, for all cash flow hedges, including hedges of transactions resulting in the recognition of non-financial items, the amounts accumulated in the cash flow hedge reserve were reclassified to profit or loss in the same period or periods during which the hedged expected future cash flows affected profit or loss. Furthermore, for cash flow hedges that were terminated before 2017, forward points were recognised immediately in profit or loss.




D I emPloYee beneFits

The Group uses the following programs to reward and recognise employees and key executives, including key management personnel.

• EconomicValueAdded(EVA)-basedIncentiveScheme• Definedcontributionplans• Employeebenefits• Shareplans

The Group believes that these programs reinforce the value of ownership and incentivise and drive performance both individually and collectively to maximise returns to the shareholders.

D1 Economic Value Added (EVA)-based Incentive Scheme D3 Employee benefitsD2 Personnel expenses D4 Share-based payment arrangements

D1 economic Value Added (eVA)-based incentive scheme (ebis)

The Group adopts an incentive compensation plan, which is tied to the creation of EVA, as well as attainment of individual and Group performance goals for its key executives. An EVA bank is used to hold incentive compensation credited in any year.

Typically a portion of EVA-based bonus declared in the financial year is paid out in cash each year, with the balance being deferred for payment in the following years.

Key estimate and judgement: ebis

Estimates of the Group’s obligations arising from the EBIS at the reporting date may be affected by future events, which cannot be predicated with any certainty. The assumptions and estimates are made based on management’s knowledge and experience and may vary from actual experience so that the actual liability may vary considerably from the best estimates. Negative EVA will result in a clawback of EVA bonus accumulated in previous years.

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D2 Personnel expenses

group 2018$’000

2017$’000

Wages and salaries 1,617,337 1,582,092Contributions to defined contribution plans 174,852 172,640Defined benefit plan expenses 8,140 6,109Share-based payments 20,038 14,160Other personnel expenses 195,720 186,244

2,016,087 1,961,245


(i) Short-term employee benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided.

(ii) Defined contribution plans

Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into separate entities such as the Central Provident Fund and will have no legal or constructive obligation to pay further amounts. The Group’s contributions to the defined contribution plans are recognised in the income statement as expenses in the financial year to which they relate.

D3 employee benefits

group 2018$’000

2017$’000

1 January2017$’000

Net defined benefit asset – (243) (151)Total employee benefit asset – (243) (151)

Net defined benefit liabilities 106,041 100,514 82,438Liability for staff benefits 4,376 4,646 4,678Total employee benefit liabilities 110,417 105,160 87,116

Non-current 108,016 102,669 85,200Current 2,401 2,491 1,916

110,417 105,160 87,116



D3 employee benefits (continued) movement in net defined (asset)/liability

The following table shows a reconciliation from the opening balances to the closing balances for net defined benefit (asset)/liability and its components.

Defined benefit obligation

Fair value of plan assets

net defined benefit liability/(asset)

group 2018$’000

2017$’000

2018$’000

2017$’000

2018$’000

2017$’000

Balance at 1 January 107,874 89,706 (7,603) (7,419) 100,271 82,287included in profit or lossCurrent service cost 6,522 4,975 – – 6,522 4,975Interest cost/(income) 2,044 1,737 (117) (162) 1,927 1,575Administrative expenses – – (243) (238) (243) (238)Translation difference (591) 770 525 (698) (66) 72

7,975 7,482 165 (1,098) 8,140 6,384

included in ociRemeasurements loss/(gain):

• Actuarialloss/(gain) arising from:- demographic assumptions 143 8,662 – – 143 8,662- financial assumptions 424 (1,880) 35 – 459 (1,880)- experience assumptions 146 1,918 – 8 146 1,926

• Returnonplanassets excluding interest income – – (13) (30) (13) (30)

713 8,700 22 (22) 735 8,678otherContributions paid

by the employer 1,181 881 – – 1,181 881Benefits paid (2,271) (2,427) 226 448 (2,045) (1,979)Translation difference (2,111) 3,532 (130) 488 (2,241) 4,020Balance at 31 December 113,361 107,874 (7,320) (7,603) 106,041 100,271

The expenses are recognised in the following line items in profit or loss:

group 2018$’000

2017$’000

Cost of sales 8,393 6,146Administrative expenses (243) (12)Other operating expenses – (25)Finance cost, net (10) 275Defined benefit obligation expenses 8,140 6,384

224 ST ENGINEERING


D3 employee benefits (continued)

The fair values of plan assets in each category are as follows:

group 2018$’000

2017$’000

1 January2017$’000

Equity securities 214 228 207Government bonds 433 426 378Derivatives 67 97 93Funds managed by a trustee 1,990 2,163 2,046Funds with insurance companies 4,616 4,689 4,695Fair value of plan assets 7,320 7,603 7,419

All equity securities and government bonds have quoted prices in active markets. All government bonds have an average rating of A+.

Defined benefit obligation

(a) Actuarial assumptions

The following were the principal actuarial assumptions at the reporting date (expressed as weighted averages):

group 2018%

2017%

1 January2017

%

Discount rate 1.9 1.8 1.7Future salary growth 2.8 2.8 2.8Future pension growth 1.6 1.5 1.7

Assumptions regarding future mortality have been based on published statistics and mortality tables.

The current longevities underlying the values of the defined benefit obligation at the reporting date were as follows:

group 2018 20171 January

2017

Longevity at age 65 for current pensioners:Males 20.2 19.4 19.3Females 23.7 23.5 23.4

Longevity at age 65 for current members aged 45:Males 23.0 22.0 21.9Females 25.9 25.9 25.9

At 31 December 2018, the weighted average duration of the defined benefit obligation was 17.8 years (2017: 18.9 years; 1 January 2017: 14.2 years).



D3 employee benefits (continued)

Defined benefit obligation (continued)

(b) sensitivity analysis

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation by the amounts shown below.

2018 2017

group increase$’000

Decrease$’000

Increase$’000

Decrease$’000

Discount rate (0.5% movement) (8,453) 9,690 (8,044) 9,206Future salary growth (0.25% movement) 200 (183) 988 (932)Future pension growth (0.25% movement) 880 (847) 243 (220)Future mortality (10% movement) – 1,253 – 1,041


A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Group’s net obligation in respect of defined benefit plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods; that benefit is discounted to determine its present value.

The fair value of any plan assets is deducted. The Group determines the net interest expense/(income) on the net defined benefit liability/(asset) for the period by applying the discount rate used to measure the defined benefit obligation at the beginning of the annual period to the net defined benefit liability/(asset).

D4 share-based payment arrangements

Movements in the number of shares under the ESOP, PSP and RSP are as follows:

2018 2017

group PsP2010 rsP2010 ESOP PSP2010 RSP2010

outstanding options/awardsBalance at 1 January 5,007,919 10,412,458 10,051,479 4,842,471 10,727,047Granted 1,724,540 7,299,438 – 1,714,650 5,355,322Exercised – – (7,323,524) – –Lapsed (261,901) (654,122) (2,727,955) (345,415) (371,665)Released (842,788) (4,550,187) – – (4,292,460)Cancelled (809,736) (6,300) – (1,203,787) (1,005,786)Balance at 31 December 4,818,034 12,501,287 – 5,007,919 10,412,458

These shares were awarded by reissuance of treasury shares.

226 ST ENGINEERING


D4 share-based payment arrangements (continued)

singapore technologies engineering share option Plan (esoP)

The weighted average share price for options exercised in 2017 was $3.68. All options have expired on 10 August 2017.

The fair value of services received in return for share options granted are measured by reference to the fair value of share options granted. The estimate of the fair value of the services received is measured based on a binomial model, taking into account the terms and conditions upon which the options were granted.

singapore technologies engineering Performance share Plan 2010 (PsP2010) and singapore technologies engineering restricted share Plan 2010 (rsP2010)

PsP rsPYear of grant Year of grant

group 2018 2017 2018 2017

Volatility of the Company’s shares (%) 18.17 18.50 18.17 18.50

Risk-free rate (%) 1.99 1.36 1.73 – 2.03 0.97 – 1.55Share price ($) 3.59 3.66 3.59 3.66Cost of equity (%) 7.3 7.1 n.A. N.A.Correlation of Index

Constituents / Defensive Index vs. the Company (%) n.A. -7.3 – 59.9 n.A. N.A.

Dividend yield (--Management’s forecast in linewith dividend policy--)

(--Management’s forecast in linewith dividend policy--)

The fair value of the performance and restricted shares is determined on grant date using the Monte Carlo simulation model.

During the current year, the Group met the pre-determined target performance level and hence, 842,788 performance shares were awarded in respect of grant made in 2015 under PSP2010.


The Group operates a number of share-based payment plans. A description of each type of share-based payment arrangement that existed at any time during the period is described above.

The grant date fair value of share-based payment awards granted to employees is recognised as an employee expense, with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards.

The amount recognised as an expense is adjusted to reflect the number of awards for which the related service and non-market vesting conditions are expected to be met, such that the amount ultimately recognised as an expense is based on the number of awards that meet the related service and non-market performance conditions at the vesting date.



e I cAPitAl structure AnD FinAncing

This section provides information relating to the Group’s capital structure and how they affect the Group’s financial position and performance, and how the risks are managed.

The primary objective of the Group’s capital management is to ensure that it maintains a strong credit rating and healthy financial metrics in order to support its business and maximise shareholder value. Capital consists of total shareholders’ funds and gross debts.

The Group manages its capital structure and makes adjustment to it, in the light of changes in economic and financial market conditions. The Group may adjust the dividend payout to shareholders, buy back or issue new shares to optimise capital structure within the Group.

e1 Capital management e6 Share capitale2 Finance costs, net e7 Treasury sharese3 Investments e8 Capital reservese4 Borrowings e9 Other reservese5 Commitments and contingent liabilities e10 Dividends

e1 capital management

The Group is currently in a net debt position after inclusion of present value of operating lease obligations. The Group will continue to be guided by prudent financial policies of which gearing is an important aspect. Neither the Company nor any of its subsidiaries is subject to externally imposed capital requirements other than those imposed by local regulatory bodies.

group 2018$’000

2017$’000

1 January2017$’000

Gross debt Bank loans 481,060 424,857 338,524 Bonds – 667,750 721,098 Capitalised lease obligations 14,719 16,639 18,785 Present value of operating leases 243,359 293,724 330,585 Other loans – 6,818 1,868 Financial guarantees 87,921 84,856 52,000

827,059 1,494,644 1,462,860

228 ST ENGINEERING


e1 capital management (continued)

group 2018$’000

2017$’000

1 January2017$’000

Shareholders’ funds Share capital 895,926 895,926 895,926 Treasury shares (9,030) (22,870) (44,081) Capital and other reserves 46,120 52,302 56,518 Retained earnings 1,313,361 1,289,653 1,258,179

2,246,377 2,215,011 2,166,542Non-controlling interests 288,236 281,325 261,934

2,534,613 2,496,336 2,428,476

Gross debt/equity ratio 0.3 0.6 0.6

Cash and cash equivalents 414,400 997,614 903,632Funds under management – 350,975 499,812

414,400 1,348,589 1,403,444Gross debt (excluding bank overdrafts) (827,059) (1,494,644) (1,462,860)Net debt position (412,659) (146,055) (59,416)

e2 Finance costs, net

group 2018$’000

2017$’000

Finance incomeDividend income from quoted equity investments – 7Interest income- bank deposits 8,809 8,570- staff loans 9 9- finance lease 107 118- bonds 6,834 13,846- contracts with customers 495 428- others 1,652 1,647Exchange gain, net 3,895 12,025Gain on disposal of investments – 540Fair value changes of financial instruments- gain on forward currency contract designated as hedging instrument 359 213- gain on ineffective portion of forward currency contract designated as

hedging instrument in cash flow hedges 8 –Fair value changes of hedged items 189 1,247

22,357 38,650



e2 Finance costs, net (continued)

group 2018$’000

2017$’000

Finance costsInterest expense- bank loans and overdrafts (7,754) (7,397)- bonds (31,891) (31,595)- finance lease (1,210) (760)- contracts with customers (1,550) (1,411)- others (2,495) (1,446)Loss on disposal of investments (5,173) –Net change in fair value of cash flow hedges reclassified from equity

on occurrence of forecast transactions (570) (1,598)Fair value changes of financial instruments- loss on fair value changes of forward currency contract and cross currency

interest rate swaps not designated as hedging instrument (5,266) (13,023)- loss on ineffective portion of forward currency contract designated

as hedging instrument – (5)Impairment losses on unquoted investments – (447)

(55,909) (57,682)

Finance costs, net, recognised in profit or loss (33,552) (19,032)


Finance income comprises interest income, dividend income, gains on disposal and fair valuation of financial assets and gains on hedging instruments that are recognised in profit or loss. Interest income is recognised as it accrues in profit or loss, using the effective interest method. Dividend income is recognised in profit or loss when the shareholder’s right to receive payment is established.

Finance costs comprise interest expense, losses on disposal and fair valuation of financial assets or impairment losses recognised on investments, and losses on hedging instruments that are recognised in profit or loss. Interest expense that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in profit or loss using the effective interest method.

Foreign currency gains and losses on financial assets and liabilities are reported on a net basis as either finance income or finance cost.

230 ST ENGINEERING


e3 investments


2017$’000

1 January2017$’000

quoted investmentsEquity shares, at FVOCI C14 422 – –

Equity shares, at fair value (Available-for-sale) – 357 639

Equity shares, at FVTPL C14 – – 364Total quoted investments 422 357 1,003

unquoted investments Equity shares (FVOCI) 16,392 9,359 10,114

Bonds, at fair value (Available-for-sale) C14 – 350,975 499,812

Venture capital funds and limited partnership, at fair value (Available-for-sale) C14 – 12 12

Total unquoted investments 16,392 360,346 509,938

total investments, net of impairment losses 16,814 360,703 510,941

Represented by: Short-term investments 422 357 188,890 Long-term investments 16,392 360,346 322,051

16,814 360,703 510,941

In the prior year, the bonds at fair value had stated interest rates of 1.875% to 7.625% per annum and matured from 21 March 2018 to 28 March 2073.


NOTES TO THEFINANCIAL STATEMENTS31 DECEMBER 2018(CURRENCY – SINGAPORE DOLLARS UNLESS OTHERWISE STATED)

E4 Borrowings

Group Note Non-current$’000

Current$’000

Total$’000

31 December 2018Bank loans (b) 256,105 224,955 481,060 Lease obligations (c) 14,258 461 14,719

270,363 225,416 495,779

31 December 2017Unsecured fixed rate bonds (a) 667,750 – 667,750Bank loans (b) 210,640 214,217 424,857Lease obligations (c) 16,017 622 16,639Other loans 15 6,803 6,818

894,422 221,642 1,116,064

1 January 2017Unsecured fixed rate bonds (a) 721,098 – 721,098Bank loans (b) 253,471 85,053 338,524Lease obligations (c) 18,124 661 18,785Other loans 155 1,713 1,868

992,848 87,427 1,080,275

(a) Unsecured fixed rate bonds

Group 2018$’000

2017$’000

1 January 2017$’000

Principal – 668,500 722,400Unamortised discount – (750) (1,302) – 667,750 721,098

Unamortised discount: At beginning of the year 750 1,302 1,733 Amortisation for the year (748) (471) (446) Translation difference (2) (81) 15

– 750 1,302

On 16 July 2009, the Group issued US$500 million 4.80% Notes due 2019 under its US$1.2 billion Multicurrency Medium Term Note Programme. The bonds bore interest at a fixed rate of 4.80% per annum and interest was payable every six months from the date of issue. The bonds were unconditionally and irrevocably guaranteed by the Company.

On 16 July 2018, the Group redeemed all outstanding US$500 million 4.80% Notes, at the make whole redemption price amounting to US$510,784,000, of which US$10,784,000 was recognised as part of finance cost.

232 ST ENGINEERING


E4 Borrowings (continued)

(b) Secured and unsecured bank loans

Group CurrencyEffective

interest rate%

Maturity 2018$’000

2017$’000

1 January 2017$’000

Bank loans SGD 2.00 2019 80,000 25,000 25,000USD 2.07 – 4.62 2019 – 2023 299,394 321,639 242,726RMB 4.75 2019 – 2021 21,106 32,422 43,006BRL – – – – 1,031EUR 0.53 – 1.59 2025 – 2027 80,560 45,796 26,761

481,060 424,857 338,524

- Unsecured 400,253 361,402 252,065- Secured 80,807 63,455 86,459

481,060 424,857 338,524

There are bank loans which are secured by assets as follows:

Secured by Loan amount ($)

Certain property, plant and equipment of subsidiaries – $62,573,000 (2017: $57,032,000; 1 January 2017: $57,678,000)

Subsidiary’s land use right – $18,234,000 (2017: $6,423,000; 1 January 2017: $6,510,000)

Bank loans denominated in currencies other than the functional currency of the Company and its subsidiaries as at 31 December 2018 is $81,960,000 (2017: $42,206,000; 1 January 2017: $43,344,000) denominated in USD.




(c) Lease obligations

A subsidiary leases certain land, buildings and equipment from a foreign airport authority under a finance lease arrangement until 31 October 2041, with an option to terminate the lease at any time with a 36-month written notice. The leased assets are pledged as collateral against the lease.

The obligations under the finance leases to be paid are as follows:

GroupWithin 1 year$’000

Between 1 and 5 years

$’000

After 5 years

$’000Total$’000

31 December 2018Minimum lease payment 1,181 4,488 19,156 24,825 Interest (720) (2,727) (6,659) (10,106) Present value of payment 461 1,761 12,497 14,719

31 December 2017Minimum lease payment 1,280 4,590 26,654 32,524Interest (658) (2,666) (12,561) (15,885)Present value of payment 622 1,924 14,093 16,639

1 January 2017Minimum lease payment 1,353 5,040 30,082 36,475Interest (692) (2,845) (14,153) (17,690)Present value of payment 661 2,195 15,929 18,785

2018$’000

2017$’000

1 January2017$’000

Repayable: Within 1 year 461 622 661 After 1 year 14,258 16,017 18,124

14,719 16,639 18,785

Lease terms do not contain restrictions concerning dividends, additional debt or further leasing.

234 ST ENGINEERING



Liabilities

Borrowings$’000

Trade payables

and accruals

$’000

Amounts due to related parties

$’000

Deposits pledged

$’000Total$’000

Balance at 1 January 2018 1,116,064 1,731,582 104,059 (1,389) 2,950,316Changes from financing cash flowsProceeds from bank loans 307,901 – – – 307,901Proceeds of a loan from a joint venture – – 17,925 – 17,925Repayment of bank loans (247,134) – – – (247,134)Repayment of other loans (148) – – – (148)Repayment of lease obligations (2,513) – – – (2,513)Repayment of loan to a joint venture – – (30,805) – (30,805)Redemption of medium term notes (681,100) – – – (681,100)Interest paid – (49,416) – – (49,416)Deposit discharged – – – 9 9Total changes from financing cash

flows (622,994) (49,416) (12,880) 9 (685,281)Changes arising from obtaining or

losing control of subsidiaries or other businesses (13,326) (45,345) – – (58,671)

The effect of changes in foreign exchange rates 14,714 1,595 8 – 16,317

Change in fair value – 11,174 – – 11,174Liability-related other changesWorking capital changes 573 216,814 (6,195) – 211,192Interest expense 748 43,699 453 – 44,900Total liability-related other changes 1,321 260,513 (5,742) – 256,092

Balance at 31 December 2018 495,779 1,910,103 85,445 (1,380) 2,489,947




Reconciliation of movements of liabilities to cash flows arising from financing activities

Liabilities

Borrowings$’000

Trade payables

and accruals

$’000

Amounts due to related parties

$’000

Deposits pledged

$’000Total$’000

Balance at 1 January 2017 1,080,275 1,872,526 28,407 (1,258) 2,979,950Changes from financing cash flowsProceeds from bank loans 171,412 – – – 171,412Proceeds from loan from non-

controlling interests of a subsidiary 5,152 – – – 5,152Proceeds of a loan from a joint venture – – 36,463 – 36,463Repayment of bank loans (65,702) – – – (65,702)Repayment of other loans (137) – – – (137)Repayment of lease obligations (784) – – – (784)Repayment of loan to a joint venture – – (19,607) – (19,607)Interest paid – (41,824) – – (41,824)Deposit pledged – – – (131) (131)Total changes from financing

cash flows 109,941 (41,824) 16,856 (131) 84,842Changes arising from obtaining or

losing control of subsidiaries or other businesses – 9,504 – – 9,504

The effect of changes in foreign exchange rates (74,623) (24,722) – – (99,345)

Change in fair value – (39,986) – – (39,986)Liability-related other changesWorking capital changes – (86,054) 58,796 – (27,258)Interest expense 471 42,138 – – 42,609Total liability-related other changes 471 (43,916) 58,796 – 15,351

Balance at 31 December 2017 1,116,064 1,731,582 104,059 (1,389) 2,950,316

236 ST ENGINEERING


E5 Commitments and contingent liabilities

(i) Capital commitments

Group 2018$’000

2017$’000

Capital expenditure contracted but not provided in the financial statements 98,976 34,621

(ii) Leases – As lessee

The Group has several operating lease agreements for leasehold land and buildings, office premises and computers. Lease terms do not contain restrictions on the Group’s activities concerning dividends, additional debt or further leasing. None of the operating leases is subject to contingent rent arrangements.

Future minimum lease payments under non-cancellable operating leases are payable as follows:

Group 2018$’000

2017$’000

1 January 2017$’000

Third partiesWithin 1 year 56,588 48,267 46,506Between 1 and 5 years 119,768 122,879 130,658After 5 years 172,039 188,381 206,243

348,395 359,527 383,407

Related partiesWithin 1 year 5,972 5,657 5,342Between 1 and 5 years 15,426 14,708 15,430After 5 years 21,079 24,821 28,419

42,477 45,186 49,191

(iii) Leases – As lessor

The Group has entered into commercial leases on its aircraft, aircraft engines and certain property, plant and equipment. The non-cancellable leases have lease terms ranging from 3 months to 13 years.

The future minimum lease payments under non-cancellable operating leases are receivable as follows:

Group 2018$’000

2017$’000

1 January 2017$’000

Within 1 year 8,751 16,926 13,614Between 1 and 5 years 13,727 25,657 28,727After 5 years 7,639 9,876 11,650

30,117 52,459 53,991



E5 Commitments and contingent liabilities (continued)

(iv) Contingent liabilities (unsecured)

The Group is a party to various claims that arise in the normal course of the Group’s business. The total liability on these matters cannot be determined with certainty. However, in the opinion of management, the ultimate liability, to the extent not otherwise provided for, will not materially impact the consolidated financial statements of the Group.

Recognition and measurement

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased asset, are classified as operating leases. Operating lease payments are recognised as an expense in profit or loss on a straight-line basis over the lease term.

The aggregate benefit of incentives provided by the lessor is recognised as a reduction of rental expense over the lease term on a straight-line basis.

E6 Share capital

Company 2018$’000

2017$’000

Issued and fully paidAt beginning and end of the year

3,122,495,197 ordinary shares 895,926 895,926

Included in share capital is a special share issued to the Minister for Finance. The special share enjoys all the rights attached to the ordinary shares. In addition, the special share carries the right to approve any resolution to be passed by the Company, either in general meeting or by its Board of Directors, on certain matters specified in the Company’s Constitution. The special share may be converted at any time into an ordinary share.

The holders of ordinary shares are entitled to receive dividends as and when declared by the Company. All ordinary shares carry one vote per share without restriction.


Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects.

238 ST ENGINEERING


E7 Treasury shares

Group 2018$’000

2017$’000

At beginning of the year (22,870) (44,081)Purchased during the year (4,354) (15,748)Reissue of treasury shares pursuant to share plans 18,194 36,959At end of the year (9,030) (22,870)

Treasury shares relate to ordinary shares of the Company that are held by the Company.

During the financial year, the Company purchased 1,321,400 (2017: 4,500,000; 1 January 2017: 1,088,900) of its ordinary shares by way of on-market purchases. The shares, held as treasury shares, were included as deduction against shareholders’ equity.

The cost of treasury shares re-issued pursuant to the share option plans amounted to Nil (2017: $23,272,000; 1 January 2017: $10,399,000). In addition, 5,392,975 (2017: 4,292,460; 1 January 2017: 4,890,801) treasury shares, at a cost of $18,194,000 (2017: $13,687,000; 1 January 2017: $15,527,000), were reissued pursuant to its RSP and PSP respectively.


When ordinary shares are reacquired by the Company, the consideration paid is recognised as deduction from equity. Reacquired shares are classified as treasury shares. When treasury shares are sold, or re-issued subsequently, the cost of treasury shares is reversed from treasury shares account and the realised gain or loss on transaction is presented as a change in equity of the Company. No gain or loss is recognised in profit or loss.

Treasury shares have no voting rights and no dividends are allocated to them.

E8 Capital reserves

Included in capital reserve is:

(a) an amount of $115,948,000 (2017: $115,948,000; 1 January 2017: $115,948,000) relating to share premium of the respective pooled enterprises, namely ST Engineering Aerospace Ltd, ST Engineering Electronics Ltd, ST Engineering Land Systems Ltd and ST Engineering Marine Ltd classified as capital reserve upon the pooling of interests during the financial year ended 31 December 1997; and

(b) an amount of $2,226,000 (2017: realised gain of $3,834,000; 1 January 2017: realised loss of $2,764,000) relating to realised gain on re-issuance of treasury shares under share-based payment arrangements as at 31 December 2018.



E9 Other reserves

Group 2018$’000

2017$’000

1 January 2017$’000

Foreign currency translation reserve (142,980) (157,191) (100,181)Statutory reserve 1,190 2,064 1,974Fair value reserve (359) 22,764 (27,896) Share-based payment reserve 75,264 71,372 75,462Premium paid on acquisition of non-controlling interests (5,169) (6,489) (6,025)

(72,054) (67,480) (56,666)

Group 2018$’000

2017$’000

Fair value reserve movement arising from other comprehensive income comprises of:

Net fair value changes on financial assets:- Net fair value changes during the year • FVOCIequityinstruments 124 – •Available-for-salefinancialassets – 9,627- Reclassification adjustment to profit or loss on disposal of financial assets in finance costs, net (2,343) (510)- Reclassification to retained earnings on realisation (28) (447)

(2,247) 8,670

Foreign currency translation reserve movement arising from other comprehensive income comprises of:

Foreign currency translation differences arising from:- Translation of quasi equity loans forming part of net investments

in foreign entities (1,180) 5,255- Translation of foreign currency loans used as hedging instruments for effective net investment hedges (7,254) 25,225- Share of translation difference of associates and joint ventures (213) (11,102)- Reserves released on disposal of subsidiaries 12,394 2,161- Translation of foreign entities 10,464 (78,549)

14,211 (57,010)

240 ST ENGINEERING


E9 Other reserves (continued)

In the prior year, bonds amounting to $312.9 million (US$234 million) (1 January 2017: $338.1 million (US$234million)) was designated as a hedge of the net investment in Vision Technologies Systems, Inc. and its subsidiaries and was being used to hedge the Group’s exposure to foreign exchange risk on this investment.

Type of reserve Nature

Foreign currency translation reserve

Comprises foreign exchange differences arising from the translation of the financial statements of foreign entities, effective portion of the hedging instrument which is used to hedge against the Group’s net investment in foreign currencies as well as from the translation of foreign currency loans used to hedge or form part of the Group’s net investments in foreign entities.

Statutory reserve Statutory reserve comprise of transfers from revenue reserve in accordance with the regulations of the foreign jurisdiction in which the Group’s subsidiaries and joint ventures operate, principally in the People’s Republic of China where the subsidiaries and joint ventures are required to make appropriation to a Statutory Reserve Fund and Enterprise Expansion Fund. The laws of the countries restrict the distribution and use of these statutory reserves.

Fair value reserve Fair value reserve records the cumulative fair value changes of financial instrumentsatFVOCIandtheeffectiveportionofhedginginstruments,untiltheyare disposed or impaired.

Share-based payment reserve

Represents the cumulative value of services received for the issuance of the options and shares under the share plans of the Company issued to employees and non-executive directors.

Premium paid on acquisition of non-controlling interests

Difference between the consideration paid on acquisition of non-controlling interests and the carrying value of the proportionate share of the net assets acquired.

E10 Dividends

Company 2018$’000

2017$’000

Final dividend paid in respect of the previous financial year of 10.0 cents (2017: 10.0 cents) per share 312,250 312,250

Interim dividend paid in respect of the current financial year of 5.0 cents (2017: 5.0 cents) per share 155,968 155,996

468,218 468,246Additional final dividend paid in respect of the previous financial year

due to issue of shares before books closure date (214) (605)468,004 467,641

The Directors propose a final dividend of 10.0 cents (2017: 10.0 cents) per share amounting to $312.2 million (2017: $312.2 million) in respect of the financial year ended 31 December 2018.

These dividends have not been recognised as a liability as at year end as they are subject to approval of the shareholders at the Annual General Meeting of the Company.



F I GROUp STRUCTURE

This section explains significant aspects of ST Engineering’s group structure, including joint arrangements that the Group has interest in, its controlled entities and how changes have affected the Group structure. It also provides information on business acquisitions and disposals made during the financial year as well as information relating to ST Engineering’s related parties and the extent of related party transactions.

F1 Subsidiaries F4 Associates and joint ventures

F2 Acquisition and disposal of controlling interests in subsidiaries in 2018/2017

F5 Related party information

F3 Non-controlling interests in subsidiaries F6 Parent entity disclosures

F1 Subsidiaries Details of the significant subsidiaries of the Group are as follows:

Effective equity interest held by the Group

2018%

2017%

1 January 2017

%

(a) ST Engineering Aerospace Ltd (formerly known as Singapore Technologies Aerospace Ltd) and its subsidiaries 100 100 100

Elbe Flugzeugwerke GmbH z 55 55 55ST Aerospace Engineering Pte Ltd 100 100 100ST Aerospace Engines Pte Ltd 100 100 100ST Aerospace Services Co Pte. Ltd. 80 80 80

ST Aerospace Solutions (Europe) A/S z 100 100 100ST Aerospace Supplies Pte Ltd 100 100 100ST Aerospace Systems Pte Ltd 100 100 100

(b) ST Engineering Electronics Ltd (formerly known as Singapore Technologies Electronics Limited) and its subsidiaries 100 100 100

ST Electronics (Info-Comm Systems) Pte. Ltd. 100 100 100ST Electronics (Info-Software Systems) Pte. Ltd. and its subsidiaries: 100 100 100

ST Electronics (e-Services) Pte. Ltd. 100 100 100ST Electronics (Data Centre Solutions) Pte. Ltd. 100 100 100

ST Electronics (Satcom & Sensor Systems) Pte. Ltd. 100 100 100ST Electronics (Training & Simulation Systems) Pte. Ltd. 100 100 100

242 ST ENGINEERING


F1 Subsidiaries (continued)


2018%

2017%

1 January 2017

%

(c) ST Engineering Land Systems Ltd (formerly known as Singapore Technologies Kinetics Ltd) and its subsidiaries 100 100 100

Advanced Material Engineering Pte. Ltd. 100 100 100SDDA Pte. Ltd. 100 100 100ST Synthesis Pte Ltd 100 100 100STA Inspection Pte Ltd 100 100 100

(d) ST Engineering Marine Ltd (formerly known as Singapore Technologies Marine Ltd) 100 100 100

(e) Vision Technologies Systems, Inc.# and its subsidiaries 100 100 100

VisionTechnologiesAerospace,Incorporated# and its subsidiaries: 100 100 100

VTMobileAerospaceEngineering,Inc.# 100 100 100VTSanAntonioAerospace,Inc.# 100 100 100

VisionTechnologiesElectronics,Inc.# and its subsidiary: 100 100 100VTiDirect,Inc.# 100 100 100

VisionTechnologiesLandSystems,Inc.# and its subsidiaries: 100 100 100

VTHackney,Inc.#z 100 100 100

VTLeeBoy,Inc.#z 100 100 100

VisionTechnologiesMarine,Inc.#z and its subsidiary: 100 100 100

VTHalterMarine,Inc.#z 100 100 100

(f) ST Engineering Financial II pte. Ltd. 100 100 100

# Not required to be audited under the law in the country of incorporation.z Audited by member firms of KPMG International for consolidation purposes.

All significant subsidiaries that are required to be audited under the law in the country of incorporation are audited by KPMG LLP, Singapore and other member firms of KPMG International.



F2 Acquisition and disposal of controlling interests in subsidiaries in 2018/2017

De-consolidation and disposal of subsidiaries in 2018

In February 2018, the Group dissolved Dalfort Aerospace LP and Dalfort Aerospace GP, Inc (collectively Dalfort) as part of an effort to streamline its organisation structure.

In April 2018, the Group, together with the non-controlling shareholder, filed a bankruptcy petition to the People’s Court of Dantu District in Zhenjiang, Jiangsu for its two subsidiaries, Jiangsu Huatong Kinetics Co., Ltd and Jiangsu Huaran Kinetics Co., Ltd (collectively JHK). The Group derecognised the related assets, liabilities and non-controlling interest of JHK after the Court approved the bankruptcy petition in May 2018.

During the year, the Group completed its divestment of LeeBoy India Construction Equipment Private Limited (LBI)andAviationAcademyofAmerica,Inc.andVTAviationServices,Inc.(collectivelyAAA)inOctober2018andDecember 2018 respectively.

The disposed subsidiaries contributed revenue of $11,492,000 and loss before tax of $5,937,000 for the period from 1 January 2018 to the respective dates of disposal.

The financial effects arising from the de-consolidation and disposal of subsidiaries are as follows:

Dalfort$’000

JHK$’000

LBI$’000

AAA$’000

Total$’000

Property, plant and equipment – 64,187 1,357 3,713 69,257Intangible assets – – – 996 996Inventories – 2,497 6,062 – 8,559Trade receivables – – 2,850 – 2,850Advances and other receivables – 727 4,789 669 6,185Bank balances and other liquid funds – 2,622 317 3 2,942Trade payables and accruals – (39,850) (4,964) (531) (45,345)Provisions – (186) (477) – (663)Borrowings – (13,326) – – (13,326)Deferred income – (15,148) – – (15,148)Contract liabilities – (1,519) (20) – (1,539)Deferred tax liabilities – (4) – – (4)Net assets disposed – – 9,914 4,850 14,764Realisation of reserves 4,752 – 3,065 955 8,772Loss on disposal (4,752) – (11,543) (3,786) (20,081)Sale consideration – – 1,436 2,019 3,455Less: bank balances and other liquid

funds in subsidiaries disposed – (2,622) (317) (3) (2,942)Consideration receivable as at

31 December 2018 – – (375) – (375)Net cash (outflow)/inflow on disposal – (2,622) 744 2,016 138

244 ST ENGINEERING


F2 Acquisition and disposal of controlling interests in subsidiaries in 2018/2017 (continued)

Acquisitions of controlling interests in Aethon, Inc. (Aethon) in 2017

In the prior year, the Group acquired 100% of Aethon for a cash consideration of $52.6 million. Aethon specialises in provision of autonomous mobile robots for material transportation and delivery.

Following the completion of the final purchase price allocation during the financial year, the Group made adjustments to the provisional fair value originally recorded in the prior year.

The effect of the adjustments made during the 12-month period from acquisition date (the Window Period) is set out below:

Fair values recognised

on acquisition (provisional)

2017$’000

Adjustments during

Window period

2018$’000

Fair values recognised on

acquisition (final)2018$’000

Property, plant and equipment 993 – 993Intangible assets 20,406 – 20,406Inventories and work-in-progress 3,477 – 3,477Trade receivables 2,455 – 2,455Bank balances and other liquid funds 2,560 – 2,560Trade payables and accruals (9,504) – (9,504)Deferred tax liabilities (7,647) 4,293 (3,354)Net identifiable assets 12,740 4,293 17,033Goodwill arising on consolidation 39,825 (4,293) 35,532Total purchase consideration 52,565 – 52,565

Cash outflow on acquisition:Cash consideration paid 52,565 – 52,565Less: cash acquired (2,560) – (2,560)Net cash outflow on acquisition 50,005 – 50,005

Purchase price adjustments, which are non-cash in nature, made during the Window Period have not been applied retrospectively as these adjustments, which relate mainly to balance sheet effects and certain consequential income statement effects, are immaterial to the Group.



F3 Non-controlling interests in subsidiaries

The following table summarises the information relating to each of the Group’s subsidiaries with material non-controlling interests (NCI), based on their respective (consolidated) financial statements prepared in accordance with SFRS(I), modified for fair value adjustments on acquisition and differences in Group’s accounting policies. The summarised financial information is not adjusted for percentage ownership held by NCI.

2018 2017

Name of subsidiary

ST Aerospace

Services Co

pte. Ltd.$’000

Eco-Services,

LLC$’000

Elbe Flugzeuwerke

GmbH$’000

STELOp pte. Ltd.

$’000

Other individually immaterial

subsidiaries$’000

Intra-group

elimination$’000

Total$’000

ST Aerospace

Services Co

pte. Ltd.$’000

Eco-Services,

LLC$’000

Elbe Flugzeuwerke

GmbH$’000

STELOp pte. Ltd.

$’000


subsidiaries$’000

Intra-group

elimination$’000

Total$’000

NCI percentage 20% 49.9% 45% 49.95% 20% 49.9% 45% 49.95%

principal place of business/country of incorporation Singapore USA Germany Singapore Singapore USA Germany Singapore

Revenue 261,838 22,448 480,806 46,983 260,475 27,196 489,127 42,233

Profit 30,660 2,233 26,272 1,721 34,539 3,106 28,205 285

Other comprehensive income (226) 1,176 (26,177) – 4,904 (4,361) 28,297 –

Total comprehensive income 30,434 3,409 95 1,721 39,443 (1,255) 56,502 285

Attributable to NCI:

- Profit/(loss) 6,132 1,114 11,822 858 2,733 (478) 22,181 6,908 1,550 12,692 145 2,616 (450) 23,461

- Other comprehensive loss (45) 587 (11,780) – (270) (1) (11,509) 981 (2,176) 12,734 – 383 9 11,931

- Total comprehensive income 6,087 1,701 42 858 2,463 (479) 10,672 7,889 (626) 25,426 145 2,999 (441) 35,392

Non-current assets 52,018 21,530 571,589 2,394 55,021 23,411 533,691 2,674

Current assets 233,439 36,610 264,608 47,893 209,938 34,999 304,341 53,910

Non-current liabilities (7,016) – (297,484) (1,258) (9,769) – (243,243) –

Current liabilities (99,185) (2,488) (123,683) (35,853) (76,378) (4,269) (178,575) (44,961)

Net assets 179,256 55,652 415,030 13,176 178,812 54,141 416,214 11,623

Net assets attributable to NCI 35,851 27,770 186,764 6,581 25,375 5,895 288,236 35,762 27,016 187,296 5,806 23,831 1,614 281,325

Cash flows from operating activities 15,841 4,060 21,782 (630) 50,231 (4,913) 89,780 8,218

Cash flows from investing activities (3,117) (1,560) (62,054) (240) (6,111) (919) (74,184) (100)

Cash flows from financing activities* (18,843) (2,862) 34,610 (1,226) (46,610) (4,527) 17,814 6,987

Net (decrease)/increase in cash and cash equivalents (6,119) (362) (5,662) (2,096) (2,490) (10,359) 33,410 15,105

* including dividends to NCI (1,342) (953) – – (12,000) (1,507) – –

246 ST ENGINEERING


F3 Non-controlling interests in subsidiaries (continued)

2018 2017

Name of subsidiary

ST Aerospace

Services Co

pte. Ltd.$’000

Eco-Services,

LLC$’000

Elbe Flugzeuwerke

GmbH$’000

STELOp pte. Ltd.

$’000


subsidiaries$’000

Intra-group

elimination$’000

Total$’000

ST Aerospace

Services Co

pte. Ltd.$’000

Eco-Services,

LLC$’000

Elbe Flugzeuwerke

GmbH$’000

STELOp pte. Ltd.

$’000


subsidiaries$’000

Intra-group

elimination$’000

Total$’000

NCI percentage 20% 49.9% 45% 49.95% 20% 49.9% 45% 49.95%

principal place of business/country of incorporation Singapore USA Germany Singapore Singapore USA Germany Singapore

Revenue 261,838 22,448 480,806 46,983 260,475 27,196 489,127 42,233

Profit 30,660 2,233 26,272 1,721 34,539 3,106 28,205 285

Other comprehensive income (226) 1,176 (26,177) – 4,904 (4,361) 28,297 –

Total comprehensive income 30,434 3,409 95 1,721 39,443 (1,255) 56,502 285

Attributable to NCI:

- Profit/(loss) 6,132 1,114 11,822 858 2,733 (478) 22,181 6,908 1,550 12,692 145 2,616 (450) 23,461

- Other comprehensive loss (45) 587 (11,780) – (270) (1) (11,509) 981 (2,176) 12,734 – 383 9 11,931

- Total comprehensive income 6,087 1,701 42 858 2,463 (479) 10,672 7,889 (626) 25,426 145 2,999 (441) 35,392

Non-current assets 52,018 21,530 571,589 2,394 55,021 23,411 533,691 2,674

Current assets 233,439 36,610 264,608 47,893 209,938 34,999 304,341 53,910

Non-current liabilities (7,016) – (297,484) (1,258) (9,769) – (243,243) –

Current liabilities (99,185) (2,488) (123,683) (35,853) (76,378) (4,269) (178,575) (44,961)

Net assets 179,256 55,652 415,030 13,176 178,812 54,141 416,214 11,623

Net assets attributable to NCI 35,851 27,770 186,764 6,581 25,375 5,895 288,236 35,762 27,016 187,296 5,806 23,831 1,614 281,325

Cash flows from operating activities 15,841 4,060 21,782 (630) 50,231 (4,913) 89,780 8,218

Cash flows from investing activities (3,117) (1,560) (62,054) (240) (6,111) (919) (74,184) (100)

Cash flows from financing activities* (18,843) (2,862) 34,610 (1,226) (46,610) (4,527) 17,814 6,987

Net (decrease)/increase in cash and cash equivalents (6,119) (362) (5,662) (2,096) (2,490) (10,359) 33,410 15,105

* including dividends to NCI (1,342) (953) – – (12,000) (1,507) – –



F3 Non-controlling interests in subsidiaries (continued)

Name of subsidiary

ST Aerospace

Services Co

pte. Ltd.$’000

Eco- Services,

LLC$’000

Elbe Flugzeuwerke

GmbH$’000

STELOp pte. Ltd.

$’000

Jiangsu Huatong Kinetics Co., Ltd

$’000


subsidiaries$’000

Intra-group

elimination$’000

Total$’000

1 January 2017

NCI percentage 20% 49.9% 45% 49.95% 24.7%

principal place of business/ country of incorporation Singapore USA Germany Singapore China

Non-current assets 56,476 28,822 489,570 2,287 66,294

Current assets 240,509 34,858 224,751 56,304 14,666

Non-current liabilities (14,303) – (215,829) – (31,154)

Current liabilities (83,353) (5,264) (135,876) (46,042) (49,806)

Net assets 199,329 58,416 362,616 12,549 –

Net assets attributable to NCI 39,866 29,150 163,177 6,268 – 22,730 743 261,934

F4 Associates and joint ventures

Group 2018$’000

2017$’000

1 January 2017$’000

Unquoted shares, at fair value 23,610 7,863 –

Unquoted shares, at cost 336,682 330,460 252,540Goodwill on acquisition written off, net 38 (146) (146)Share of net assets acquired 336,720 330,314 252,394Impairment in associates and joint ventures (865) (865) (865)Share of post-acquisition reserves 96,238 111,075 154,001

432,093 440,524 405,530455,703 448,387 405,530

Represented by:Interest in associates 327,960 315,760 344,925Interest in joint ventures 127,743 132,627 60,605

455,703 448,387 405,530

248 ST ENGINEERING


F4 Associates and joint ventures (continued)

During the year,

(i) the Group sold its entire 25% interest in Airbus Helicopters Southeast Asia Private Limited for a cash consideration of $14,246,000 and a gain on disposal of $8,984,000 was recognised.

(ii) the Group partially sold 5% of its interest in ST Aerospace (Guangzhou) Aviation Services Company Limited for a cash consideration of $9,234,000 and a gain on disposal of $3,766,000 was recognised.

In the prior year, the Group acquired 51% equity interest in SP Telecommunications Pte Ltd (SPTel) for a cash consideration of $55 million. Following the acquisition, SPTel became a joint venture of the Group. At the acquisition date, based on provisionally determined fair values of the identifiable assets acquired and liabilities assumed of SPTel, a provisional goodwill of $2.9 million was recognised within the cost of investment. During the year, the amounts were finalised with no changes to the provisional amounts previously recorded.

Details of significant associates and joint ventures are as follows:

Name

principal activities

Country of incorporation/place of business


2018%

2017%

1 January 2017

%

AssociatesShanghai Technologies Aerospace Company Limited#

Aircraft and component maintenance, repair, overhaul and other related maintenance business

People’s Republic of China

49 49 49

ST Aerospace (Guangzhou) Aviation Services Company Limited#

Aircraft and component maintenance, repair, overhaul and other related maintenance business

People’s Republic of China

44 49 49

Turbine Coating Services Pte Ltd#

Repair, refurbishment and upgrading of aircraft jet engine turbine blades and vanes

Singapore 24.5 24.5 24.5

Turbine Overhaul Services Pte Ltd#

Repair and service of gas and steam turbine components

Singapore 49 49 49

CityCab Pte Ltd# Rental of taxis and the provision of charge card facilities

Singapore 46.5 46.5 46.5

Experia Events Pte. Ltd. Organising and management of conferences, exhibitions and other related activities, including the biennial Singapore Airshow event

Singapore 33 33 33




Name

principal activities

Country of incorporation/place of business


2018%

2017%

1 January 2017

%

Joint venturesTotal Engine Asset Management Pte. Ltd. #

Leasing of engines Singapore 50 50 50

Keystone Holdings (Global) Pte. Ltd.

Investment holding Singapore 50 50 50

SP Telecommunications Pte Ltd

Running, operation, management and supply of telecommunications systems

Singapore 51 51 –

# Not audited by KPMG LLP, Singapore and other member firms of KPMG International.

All significant associates and joint ventures that are required to be audited under the law in the country of

incorporation are audited by KPMG LLP, Singapore and other member firms of KPMG International, except as indicated above.

250 ST ENGINEERING



Associates

The following table summarises the information of each of the Group’s material associates, based on their respective financial statements prepared in accordance with SFRS(I), modified for fair value adjustments on acquisitions and differences with the Group’s accounting policies. The summarised financial information is not adjusted for percentage ownership held by the Group.

Name of associate

Shanghai Technologies

Aerospace Company

Limited$’000

ST Aerospace (Guangzhou)

Aviation Services

Co Ltd $’000

Turbine CoatingServices

Pte Ltd$’000

Turbine Overhaul Services

Pte Ltd$’000

CityCabPte Ltd

$’000

ExperiaEvents

Pte. Ltd.$’000

Immaterial associates

$’000Total$’000

31 December 2018

Percentage of interest 49% 44% 24.5% 49% 46.5% 33%

Revenue 111,681 61,405 47,223 335,111 127,607 54,724Profit for the year 13,317 7,114 16,171 43,259 15,224 15,945Other comprehensive

income (4,578) (3,784) 1,101 1,976 – –Total comprehensive

income 8,739 3,330 17,272 45,235 15,224 15,945Attributable to NCI – – – – 161 –Attributable to investee’s

shareholders 8,739 3,330 17,272 45,235 15,063 15,945Non-current assets 82,953 82,346 30,469 32,455 155,300 52,706Current assets 82,437 34,416 37,774 92,449 66,693 37,758Non-current liabilities (2,719) – – (25,736) (3,841)Current liabilities (25,437) (9,184) (11,468) (17,879) (34,345) (13,763)Net assets 139,953 104,859 56,775 107,025 161,912 72,860Attributable to NCI – – – – 1,377 –Attributable to investee’s

shareholders 139,953 104,859 56,775 107,025 160,535 72,860

Group’s interest in net assets of investee at beginning of the year 64,295 49,589 13,620 53,268 90,895 18,782 25,311 315,760

Group’s share of: - Profit for the year 6,525 3,345 3,962 21,197 7,004 5,262 43 47,338 - Total other comprehensive income (2,243) (1,328) 270 968 – – 982 (1,351)Total comprehensive

income 4,282 2,017 4,232 22,165 7,004 5,262 1,025 45,987Group’s contribution

during the year – – – – – – 29,136 29,136Dividends received

during the year – – (3,942) (22,991) (23,250) – (1,686) (51,869)Partial/complete

disposal of associates during the year – (5,468) – – – – (5,586) (11,054)

Carrying amount of interest in investee at end of the year 68,577 46,138 13,910 52,442 74,649 24,044 48,200 327,960




Associates (continued)

Name of associate


Aerospace Company

Limited$’000


Aviation Services

Co Ltd $’000

Turbine Coating

Services pte Ltd

$’000

Turbine Overhaul

Services pte Ltd

$’000

CityCab pte Ltd

$’000

Experia Events

pte. Ltd.$’000


$’000Total$’000

31 December 2017

percentage of interest 49% 49% 24.5% 49% 46.5% 33%

Revenue 88,119 58,947 53,538 311,274 366,555 10,219Profit/(loss) for the year 10,607 3,218 19,735 49,300 22,131 (5,734)Other comprehensive

income (2,641) (1,316) (3,980) (9,361) – –Total comprehensive

income 7,966 1,902 15,755 39,939 22,131 (5,734)Attributable to NCI – – – – 255 –Attributable to

investee’s shareholders 7,966 1,902 15,755 39,939 21,876 (5,734)

Non-current assets 86,477 81,583 30,195 28,960 204,182 55,303 Current assets 67,273 28,444 36,640 93,672 75,956 47,546 Non-current liabilities – – – – (21,932) (3,631)Current liabilities (22,536) (8,826) (11,243) (13,932) (61,267) (42,304)Net assets 131,214 101,201 55,592 108,700 196,939 56,914 Attributable to NCI – – – – 1,470 –Attributable to

investee’s shareholders 131,214 101,201 55,592 108,700 195,469 56,914

Group’s interest in net assets of investee at beginning of the year 67,271 48,657 12,470 67,576 108,622 23,974 16,355 344,925

Group’s share of: - Profit/(loss) for the year 5,197 1,577 4,835 24,162 10,172 (1,892) 1,906 45,957 - Total other comprehensive income (1,294) (645) (975) (4,587) – – 395 (7,106)Total comprehensive

income 3,903 932 3,860 19,575 10,172 (1,892) 2,301 38,851Group’s contribution

during the year – – – – – – 9,663 9,663Dividends received

during the year (6,879) – (2,710) (33,883) (27,899) (3,300) (3,008) (77,679)Carrying amount of

interest in investee at end of the year 64,295 49,589 13,620 53,268 90,895 18,782 25,311 315,760

252 ST ENGINEERING


F4 Associates and joint ventures (continued) Associates (continued)

Name of associate


Aerospace Company

Limited$’000


Aviation Services

Co Ltd $’000

Turbine CoatingServices

pte Ltd$’000

Turbine Overhaul Services

pte Ltd$’000

CityCab pte Ltd

$’000

Experia Events

pte. Ltd.$’000


$’000Total$’000

1 January 2017

percentage of interest 49% 49% 24.5% 49% 46.5% 33%

Non-current assets 89,443 64,290 59,128 29,007 222,630 57,937

Current assets 69,127 47,292 2,895 216,105 106,412 33,784

Non-current liabilities – – – – (28,341) (3,416)

Current liabilities (21,282) (12,281) (11,127) (107,202) (65,626) (15,657)

Net assets 137,288 99,301 50,896 137,910 235,075 72,648

Attributable to NCI – – – – 1,480 –

Attributable to investee’s shareholders 137,288 99,301 50,896 137,910 233,595 72,648

Group’s interest in net assets 67,271 48,657 12,470 67,576 108,622 23,974 16,355 344,925

Carrying amount of interest in investee 67,271 48,657 12,470 67,576 108,622 23,974 16,355 344,925




Joint ventures

The following table summarises the information of each of the Group’s material joint ventures, adjusted for any differences in accounting policies and reconciles the carrying amount of the Group’s interest in joint ventures and the share of profit and other comprehensive income of equity-accounted investment (net of tax). The summarised financial information is not adjusted for the percentage ownership held by the Group.

Name of joint venture

Keystone Holdings

(Global) pte. Ltd.

$’000

Total Engine Asset Management

pte Ltd.$’000

Sp Telecommunication

pte Ltd$’000

Immaterial joint

ventures $’000

Total$’000

31 December 2018

percentage of interest 50% 50% 51%

Revenue 16,825 29,289 20,075Profit/(loss) for the year a 5,168 3,830 (10,220)Other comprehensive income 1,096 2,806 –Total comprehensive income 6,264 6,636 (10,220)a Includes:

- Depreciation and amortisation of: 10,303 13,249 6,148

- Interest expense of: 2,586 8,779 –

- Income tax expense of: 962 2,308 1,345

Non-current assets 117,583 476,711 29,052Current assets b 8,508 15,601 79,260Non-current liabilities c (56,892) (360,776) (2,712)Current liabilities d (17,199) (50,086) (19,894)Net assets excluding goodwill 52,000 81,450 85,706b Includes cash and

cash equivalents of: 6,819 13,287 73,281c Includes non-current financial

liabilities (excluding trade and other payables and provisions) of: 56,892 360,776 2,712

d Includes current financial liabilities (excluding trade and other payables and provisions) of: 13,866 50,086 –

Group’s interest in net assets of investee at beginning of the year 28,656 32,899 51,550 19,522 132,627

Share of total comprehensive income 3,132 3,318 (5,011) 1,922 3,361

(Return of capital)/Group’s contribution during the year (3,761) 5,169 – (441) 967

Dividends received during the year (2,027) (661) – (6,524) (9,212)Carrying amount of interest in

investee at end of the year 26,000 40,725 46,539 14,479 127,743

254 ST ENGINEERING



Joint ventures (continued)


Keystone Holdings

(Global) pte. Ltd.

$’000


pte Ltd.$’000

Sp Telecommunication

pte Ltd$’000

Immaterial joint

ventures $’000

Total$’000

31 December 2017


Revenue 15,477 24,003 11,499Profit/(loss) for the year a 1,465 6,015 (6,256)Other comprehensive income (2,669) (5,282) –Total comprehensive income (1,204) 733 (6,256)a Includes:

- Depreciation and amortisation of: 8,903 9,542 4,105

- Interest expense of: 3,311 5,435 –

- Income tax expense of: 149 1,405 (634)

–Non-current assets 128,006 303,550 29,717Current assets b 17,336 26,261 82,715Non-current liabilities c (64,258) (258,174) (4,054)Current liabilities d (23,772) (5,839) (12,452)Net assets excluding goodwill 57,312 65,798 95,926b Includes cash and

cash equivalents of: 16,635 14,101 78,510c Includes non-current financial

liabilities (excluding trade and other payables and provisions) of: 64,258 258,174 –

d Includes current financial liabilities (excluding trade and other payables and provisions) of: 23,772 4,948 –

Group’s interest in net assets of investee at beginning of the year 15,560 26,025 – 19,020 60,605

Share of total comprehensive income (602) 367 (3,191) 2,949 (477)

Group’s contribution during the year 14,271 6,837 52,113 – 73,221

Dividends received during the year (573) (330) – (2,447) (3,350)

Group’s interest in net assets 28,656 32,899 48,922 19,522 129,999Goodwill – – 2,628 – 2,628Carrying amount of interest in

investee at end of the year 28,656 32,899 51,550 19,522 132,627




Joint ventures (continued)


Keystone Holdings

(Global) pte. Ltd.

$’000


pte Ltd.$’000

Fortis Marine Solutions

pte. Ltd.$’000

Immaterial joint

ventures $’000

Total$’000

1 January 2017


Non-current assets 111,493 168,003 –Current assets 5,973 25,965 11,815Non-current liabilities (54,181) (139,527) –Current liabilities (32,166) (2,390) (159)Net assets 31,119 52,051 11,656

Group’s interest in net assets 15,560 26,025 5,945 13,075 60,605Carrying amount of interest in investee 15,560 26,025 5,945 13,075 60,605

Basis of consolidation

(i) Business combinations

Business combinations are accounted for using the acquisition method in accordance with SFRS(I) 3 Business Combination as at the acquisition date, which is the date on which control is transferred to the Group.

Goodwill that arises upon the acquisition of subsidiaries is included in intangible assets. For the measurement of goodwill at initial recognition, refer to Note C2.

The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss.

Costs related to the acquisition, other than those associated with the issue of debt or equity securities, that the Group incurs in connection with a business combination are expensed as incurred.

Any contingent consideration payable is recognised at fair value at the acquisition date. If the contingent consideration is classified as equity, it is not remeasured and settlement is accounted for within equity. Otherwise, any subsequent changes to the fair value of the contingent consideration are recognised in profit or loss.

Non-controlling interests (NCI) that are present ownership interests and entitle their holders to a proportionate share of the acquiree’s net assets in the event of liquidation are measured either at fair value or at the NCI’s proportionate share of the recognised amounts of the acquiree’s identifiable net assets, at the acquisition date. The measurement basis taken is elected on a transaction-by-transaction basis. All other NCI are measured at acquisition-date fair value, unless another measurement basis is required by SFRS(I)s.

Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as transactions with owners in their capacity as owners and therefore no adjustments are made to goodwill and no gain or loss is recognised in profit or loss. Adjustments to NCI arising from transactions that do not involve the loss of control are based on a proportionate amount of the net assets of the subsidiary.

256 ST ENGINEERING


Basis of consolidation (continued)

(ii) Subsidiaries

Subsidiaries are entities controlled by the Group. The Group controls an entity when it is exposed to or has rights to variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases.

Consistent accounting policies are applied to like transactions and events in similar circumstances. Losses applicable to the non-controlling interests in a subsidiary are allocated to the non-controlling interests even if doing so causes the non-controlling interests to have a deficit balance.

In the Company’s separate financial statements, investments in subsidiaries are accounted for at cost less accumulated impairment losses.

(iii) Acquisitions of entities under amalgamation

The Company’s interests in ST Engineering Aerospace Ltd, ST Engineering Electronics Ltd, ST Engineering Land Systems Ltd, and ST Engineering Marine Ltd (collectively referred to as the Scheme Companies) resulted from the amalgamation of the Scheme Companies pursuant to a scheme of arrangement under Section 210 of the Companies Act, Chapter 50 in 1997.

As the amalgamation of the Scheme Companies constitutes a uniting of interests, the pooling of interests method has been adopted in the preparation of the consolidated financial statements in connection with the amalgamation.

Under the pooling of interests method, the combined assets, liabilities and reserves of the pooled enterprises are recorded at their existing carrying amounts at the date of amalgamation. The excess or deficiency of amount recorded as share capital issued (plus any additional consideration in the form of cash or other assets) over the amount recorded for the share capital acquired is recorded as capital reserve.

(iv) Loss of control

Upon the loss of control, the Group derecognises the assets and liabilities of the subsidiary, any non-controlling interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the loss of control is recognised in profit or loss. If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the date that control is lost. Subsequently, it is accounted for as an equity-accounted investee or as a financial asset at FYOCI, depending on the level of influence retained.

(v) Investments in associates and joint ventures

Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies. Significant influence is presumed to exist when the Group holds between 20% or more of the voting power of another entity. A joint venture is an arrangement in which the Group has joint control, whereby the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities.

Investments in associates and joint ventures are accounted for by the Group using the equity method (except forthoseacquiredbytheGroup’sCorporateVentureCapitalunit)andarerecognisedinitiallyatcost,whichincludes transaction costs.




Basis of consolidation (continued)

(v) Investments in associates and joint ventures (continued) The consolidated financial statements include the Group’s share of the profit or loss and other

comprehensive income (OCI) from the date that significant influence or joint control commences until the date that significant influence or joint control ceases.

When the Group’s share of losses exceeds its interest in an equity-accounted investee, the carrying amount

of the investment, including any long-term interest, is reduced to zero, and the recognition of further losses is discontinued except to the extent that the Group has an obligation to fund the investee’s operations or has made payments on behalf of the investee.

ForinvestmentsinassociatesacquiredbytheGroup’sCorporateVentureCapitalUnit,theGrouphaselectedtomeasureitsinvestmentinassociatesatFVTPLinaccordancewithSFRS(I)9Financial Instruments.

In the Company’s separate financial statements, investments in associates and joint ventures are accounted for at cost, less accumulated impairment losses.

(vi) Transactions eliminated on consolidation

All significant inter-company balances and transactions are eliminated on consolidation.


Goodwill that forms part of the carrying amount of an investment in an associate and/or joint venture is not recognised separately, and therefore is not tested for impairment separately. Instead, the entire amount of the investment in an associate and/or joint venture is tested for impairment as a single asset when there is objective evidence that the investment in an associate and/or joint venture may be impaired.

Key estimates and judgements: Critical judgements made in applying accounting policies

Information about critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements relates to assessing whether the Group has control over its investee companies.

During the year, the Group assessed the terms and conditions of the shareholders’ agreement of subsidiaries that are not wholly-owned by the Group. The Group made critical judgements over:

(a) their ability to exercise power over its investees;(b) their exposure or rights to variable returns for its investments with those investees; and(c) their ability to use its power to affect those returns.

The Group’s judgement included considerations of their power exercised at the board of the respective investees and rights and obligations arising from board reserve of matters as agreed with the other shareholders.


258 ST ENGINEERING


F5 Related party information

Key management personnel compensation

Group 2018$’000

2017$’000

Short-term employee benefits 37,308 38,468Contributions to defined contribution plans 778 825Share-based payments 9,982 8,141

48,068 47,434

In addition to related party information disclosed elsewhere in the financial statements, the Group has significant transactions with the following related parties on terms agreed between the parties.

Group 2018$’000

2017$’000

Associates of the GroupSales and services rendered 14,442 10,137Purchases and services received (41,057) (41,054)Dividend income 51,869 77,679

Joint ventures of the GroupSales and services rendered 26,161 17,501Purchases and services received (14,444) (28,554)Dividend income 9,212 3,350

Other related parties *Sales and services rendered 38,201 46,226Purchases and services received (25,581) (27,918)Rental expense (6,481) (5,994)Rental income 44 2,216

* Other related parties refer to subsidiaries, associates and joint ventures of immediate holding company.



F6 parent entity disclosures

Balance Sheet

Company Note 2018$’000

2017$’000

1 January 2017$’000

ASSETS

Non-current assetsProperty, plant and equipment 18,129 9,661 3,251Subsidiaries (i) 1,328,153 1,277,232 1,277,609Associates and joint ventures 17,657 17,657 17,657Deferred tax assets 365 2,200 4,813Amounts due from related parties (ii) – 344,514 507,257

1,364,304 1,651,264 1,810,587Current assetsAmounts due from related parties (ii) 46,382 388,894 199,634Advances and other receivables 9,170 12,923 2,084Bank balances and other liquid funds (iii) 273,456 596,494 588,862

329,008 998,311 790,580

Total assets 1,693,312 2,649,575 2,601,167

EQUITY AND LIABILITIES

Current liabilitiesTrade payables and accruals 21,337 21,019 24,148Amounts due to related parties (iv) 210,275 545,066 504,827Provision for taxation 4,518 1,000 –

236,130 567,085 528,975

Net current assets 92,878 431,226 261,605

Non-current liabilitiesTrade payables and accruals 8,706 7,608 8,997Amounts due to related parties 964 667,594 676,417

9,670 675,202 685,414

Total liabilities 245,800 1,242,287 1,214,389

Net assets 1,447,512 1,407,288 1,386,778

260 ST ENGINEERING


F6 parent entity disclosures (continued)

Balance Sheet (continued)

Company Note 2018$’000

2017$’000

1 January 2017$’000

Share capital and reservesShare capital 895,926 895,926 895,926Treasury shares (9,030) (22,870) (44,081)Capital reserves (v) 2,199 3,807 (2,791)Other reserves 65,054 61,151 65,231Retained earnings 493,363 469,274 472,493Equity attributable to owners of the Company 1,447,512 1,407,288 1,386,778

Total equity and liabilities 1,693,312 2,649,575 2,601,167

(i) There was capital contribution in the form of share options, performance shares and restricted shares issued to employees of subsidiaries amounting to $109,980,000 in 2018 (2017: $107,746,000; 1 January 2017: $106,876,000).

(ii) Included in the amounts due from related parties are:

(a) unsecured interest-free loans of $17,500,000 (2017: $9,500,000; 1 January 2017: $20,307,000) which were fully impaired. The fully impaired loans in 1 January 2017 were forgiven in the prior year;

(b) loans in 2017: $611,579,000 and 1 January 2017: $693,886,000, bearing interest at per annum rates ranging 0.56% to 2.46% and 0.72% to 2.46% respectively. The loans were unsecured and fully repaid during the year; and

(c) dividend receivable in 2017: $110,000,000 that was fully repaid during the year.

Amounts due from related parties denominated in currencies other than the functional currency of the Company as at 31 December 2018 is $3,853,000 (2017: $152,983,000; 1 January 2017: $162,599,000) denominated in USD.

(iii) Prior to 2018, the Company managed cash placed by subsidiaries and joint ventures to the Company under a cash pooling arrangement (2017: $541,958,000; 1 January 2017: $492,676,000) as part of the Group cash management and treasury activities. In 2017, fixed deposits with financial institutions matured on varying periods within 2 months (1 January 2017: 1 month) from the financial year end. Interest rates ranged from 2017: 0.32% to 3.75% (1 January 2017: 0.2% to 6.5%) per annum, which were also the effective rates.

Cash and cash equivalents denominated in currencies other than the functional currency of the Company as at 31 December are mainly as follows:

• $193,826,000(2017:$12,082,000;1January2017:$256,698,000)denominatedinUSD.



F6 parent entity disclosures (continued)

(iv) Included in the amounts due to related parties are:

(a) loans of $941,000 (2017: $606,733,000; 1 January 2017: $642,313,000) bearing interest at 5.03% (2017: 5.03%; 1 January 2017: 4.75%) per annum. The loans are unsecured and repayable on 28 February 2019; and

(b) an amount of $199,150,000 (2017: Nil; 1 January 2017: Nil) with a related corporation for overdrafts used for cash management purposes and bears an effective interest of 1.94% to 2.75% per annum (2017: Nil; 1 January 2017: Nil).

Amounts due to related parties denominated in currencies other than the functional currency of the

Company as at 31 December 2018 is $857,000 (2017: $462,715,000; 1 January 2017: $477,553,000) denominated in USD.

(v) It relates to realised gain or loss on re-issuance of treasury shares under share-based payment arrangements.

Financial risk management

• Interest rate risk: No interest rate risk exposure was disclosed as the Company had assessed that a reasonable change in the interest risk exposure would not result in any significant impact on the Company’s results.

• Foreign exchange risk: No foreign exchange sensitivity analysis was disclosed as the Company had assessed that a reasonable change in the exchange rate would not result in any significant impact on the Company’s results.

• Liquidity risk: It is not expected that the cash flows associated with the liabilities of the Company could occur at significantly different amounts.

• Credit risk: The Company limits its exposure to credit risk on amounts due from related parties which are mostly short-term in nature and bank balances and other liquid funds which are placed with reputable financial institutions.

Management actively monitors the credit ratings and does not expect any counterparty to fail to meet its obligations.

Derivatives are entered into with financial institutions which have long-term rating of A3 by Moody’s, A- by Standard & Poor’s or the equivalent by a reputable credit rating agency.

Cash and bank deposits are placed with reputable financial institutions.

As at 31 December 2018, there were no significant concentrations of credit risk, as the Company’s receivables mainly relate to related parties.

262 ST ENGINEERING


G I OTHERS




The following new SFRS(I), amendments to and interpretations of SFRS(I) are effective for annual periods beginning after 1 January 2018:

Applicable to 2019 financial statements• SFRS(I)16Leases• IFRIC23Uncertainty over Income Tax Treatments

Applicable to 2021 financial statements• SFRS(I)17Insurance Contracts

Mandatory effective date deferred• Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to

SFRS(I) 10 and IAS 28).

The Group is still in the process of assessing the impact of the new SFRS(I)s, amendments to and interpretations of SFRS(I)s on the financial statements. The Group’s preliminary assessment of SFRS(I) 16, which is expected to have a more significant impact on the Group, is as described below.

The Group also preliminarily assessed that SFRS(I) 17 is not relevant to the Group as the Group does not issue insurance contracts nor account for financial guarantee contracts as insurance contracts.

SFRS(I) 16

SFRS(I) 16 introduces a single, on-balance sheet lease accounting model for lessees. A lessee recognises a right-of-use (ROU) asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. There are recognition exemptions for short-term leases and leases of low-value items. Lessor accounting remains similar to the current standard – i.e. lessors continue to classify leases as finance or operating leases. The standard is effective for annual periods beginning on or after 1 January 2019, with early adoption permitted.

The Group plans to apply SFRS(I) 16 initially on 1 January 2019, using the modified retrospective approach. Therefore, the cumulative effect of adopting SFRS(I) 16 will be recognised as an adjustment to the opening balance of retained earnings at 1 January 2019, with no restatement of comparative information. The Group plans to apply the practical expedient to grandfather the definition of a lease on transition. The Group will apply SFRS(I) 16 to all contracts entered into before 1 January 2019 and identified as leases in accordance with SFRS(I) 1-17.

The Group expects to recognise right-of-use assets of approximately $422,497,000 on 1 January 2019, lease liabilities of $390,495,000 (after adjustments of prepayments and accrued lease payments recognised). Overall net current assets will be $49,672,000 lower due to the presentation of a portion of the liability as current liability.

The Group’s activities as a lessor are not material and the Group does not expect any significant impact on the financial statements.




In the current year, the Group has adopted the new financial reporting framework, SFRS(I), mandatory for Singapore-incorporated companies with equity instruments traded in a public market in Singapore for annual periods beginning on or after 1 January 2018. In adopting SFRS(I), the Group has applied the specific transition requirements in SFRS(I) 1 First-time Adoption of International Financial Reporting Standards.

As stated in note A, these are the first financial statements of the Group and of the Company prepared in accordance with SFRS(I).

In preparing the opening SFRS(I) balance sheet, the Group has adjusted amounts reported previously in the financial statements prepared in accordance with previous FRS.

The accounting policies set out above have been applied in preparing the financial statements for the year ended 31 December 2018, the comparative information presented in these financial statements for the year ended 31 December 2017 and in the preparation of the opening SFRS(I) balance sheet at 1 January 2017 (the Group’s date of transition), subject to the mandatory exceptions and optional exemptions under SFRS(I) 1.

In addition to the adoption of the new framework, the Group also concurrently applied new SFRS(I)s, amendments to and interpretations of SFRS(I) effective from the same date. The adoption of these SFRS(I)s, amendments to and interpretations of SFRS(I) did not have a material impact on the financial statements of the Group except for the adoption of SFRS(I) 15.

An explanation of how the transition from previous FRS to SFRS(I) and the adoption of SFRS(I) 9 and SFRS(I) 15 have affected the Group’s balance sheet, income statement and cash flows is set out under the summary of quantitative impact.

Summary of quantitative impact

The following reconciliations summarise the impacts on initial application of SFRS(I) 1, SFRS(I) 15 and SFRS(I) 9 on the Group’s balance sheet as at 1 January 2017, 31 December 2017 and 1 January 2018 and the Group’s income statement and other comprehensive income for the year ended 31 December 2017. There were no material adjustments to the Group’s statement of cash flows for the year ended 31 December 2017 arising on transition to SFRS(I).

264 ST ENGINEERING


G2 Explanation of transition to SFRS(I) and adoption of new standards (continued)

Consolidated Balance Sheet

31 December 2017 1 January 2018

GroupFRS

framework$’000

SFRS(I) 15$’000

SFRS(I)framework

$’000SFRS(I) 9

$’000

SFRS(I)framework

$’000

ASSETS

Non-current assetsProperty, plant and equipment 1,719,396 – 1,719,396 – 1,719,396Associates and joint ventures 448,387 – 448,387 – 448,387Investments 360,346 – 360,346 – 360,346Intangible assets 1,087,412 – 1,087,412 – 1,087,412Long-term trade receivables 1,052 (1,052) – – –Deferred tax assets 74,047 (19) 74,028 – 74,028Amounts due from related parties 4,806 – 4,806 – 4,806Advances and other receivables 20,406 – 20,406 – 20,406Derivative financial instruments 33,082 – 33,082 – 33,082Employee benefits 243 – 243 – 243

3,749,177 (1,071) 3,748,106 – 3,748,106

Current assetsContract assets – 939,073 939,073 – 939,073Inventories and work-in-progress 1,764,320 (681,964) 1,082,356 – 1,082,356Trade receivables 1,645,824 (705,099) 940,725 (4,206) 936,519Amounts due from related parties 28,271 – 28,271 – 28,271Advances and other receivables 286,419 105 286,524 – 286,524Short-term investments 357 – 357 – 357Bank balances and other liquid funds 999,003 – 999,003 – 999,003

4,724,194 (447,885) 4,276,309 (4,206) 4,272,103

Total assets 8,473,371 (448,956) 8,024,415 (4,206) 8,020,209


Current liabilitiesContract liabilities – 1,258,247 1,258,247 – 1,258,247Advance payments from customers 822,958 (817,149) 5,809 – 5,809Trade payables and accruals 1,612,509 (12,770) 1,599,739 – 1,599,739Amounts due to related parties 104,042 – 104,042 – 104,042Provisions 235,240 24,906 260,146 – 260,146Progress billings in excess of work-in-progress 762,483 (762,483) – – –Provision for taxation 138,730 (4,044) 134,686 – 134,686Borrowings 221,642 – 221,642 – 221,642Deferred income 630 – 630 – 630Employee benefits 2,491 – 2,491 – 2,491

3,900,725 (313,293) 3,587,432 – 3,587,432

Net current assets 823,469 (134,592) 688,877 (4,206) 684,671




Consolidated Balance Sheet (continued)

31 December 2017 1 January 2018

GroupFRS

framework$’000

SFRS(I) 15$’000

SFRS(I)framework

$’000SFRS(I) 9

$’000

SFRS(I)framework

$’000

Non-current liabilitiesContract liabilities – 521,787 521,787 – 521,787 Advance payments from customers 641,262 (641,262) – – –Trade payables and accruals 122,978 8,865 131,843 – 131,843Deferred tax liabilities 205,200 – 205,200 – 205,200 Borrowings 894,422 – 894,422 – 894,422 Deferred income 69,156 – 69,156 – 69,156Employee benefits 102,669 – 102,669 – 102,669Derivative financial instruments 15,553 – 15,553 – 15,553 Amounts due to related parties 17 – 17 – 17

2,051,257 (110,610) 1,940,647 – 1,940,647

Total liabilities 5,951,982 (423,903) 5,528,079 – 5,528,079

Net assets 2,521,389 (25,053) 2,496,336 (4,206) 2,492,130

Share capital and reservesShare capital 895,926 – 895,926 – 895,926Treasury shares (22,870) – (22,870) – (22,870)Capital reserves 119,782 – 119,782 – 119,782Other reserves (67,468) (12) (67,480) – (67,480)Retained earnings 1,314,610 (24,957) 1,289,653 (3,597) 1,286,056Equity attributable to owners of

the Company 2,239,980 (24,969) 2,215,011 (3,597) 2,211,414Non-controlling interests 281,409 (84) 281,325 (609) 280,716

2,521,389 (25,053) 2,496,336 (4,206) 2,492,130

Total equity and liabilities 8,473,371 (448,956) 8,024,415 (4,206) 8,020,209

266 ST ENGINEERING




1 January 2017

GroupFRS

framework$’000

SFRS(I) 15$’000

SFRS(I)framework

$’000

ASSETS

Non-current assetsProperty, plant and equipment 1,670,132 – 1,670,132Associates and joint ventures 405,530 – 405,530Investments 322,051 – 322,051Intangible assets 1,019,585 – 1,019,585Long-term trade receivables 1,894 – 1,894Deferred tax assets 92,528 – 92,528Amounts due from related parties 4,806 – 4,806Advances and other receivables 2,534 – 2,534Derivative financial instruments 32,967 – 32,967Employee benefits 151 – 151

3,552,178 – 3,552,178

Current assetsContract assets – 968,608 968,608Inventories and work-in-progress 1,898,278 (830,913) 1,067,365Trade receivables 1,457,982 (394,468) 1,063,514Amounts due from related parties 24,618 – 24,618Advances and other receivables 338,217 (1,911) 336,306Short-term investments 188,890 – 188,890Bank balances and other liquid funds 904,890 – 904,890

4,812,875 (258,684) 4,554,191

Total assets 8,365,053 (258,684) 8,106,369


Current liabilitiesContract liabilities – 1,369,532 1,369,532Advance payments from customers 932,515 (921,525) 10,990Trade payables and accruals 1,722,488 12,275 1,734,763Amounts due to related parties 28,449 (59) 28,390Provisions 274,662 6,104 280,766Progress billings in excess of work-in-progress 620,331 (620,331) –Provision for taxation 133,227 (1,910) 131,317Borrowings 87,427 – 87,427Employee benefits 1,916 – 1,916

3,801,015 (155,914) 3,645,101

Net current assets 1,011,860 (102,770) 909,090





1 January 2017

GroupFRS

framework$’000

SFRS(I) 15$’000

SFRS(I)framework

$’000

Non-current liabilitiesContract liabilities – 505,492 505,492Advance payments from customers 590,828 (590,828) –Trade payables and accruals 137,763 – 137,763Deferred tax liabilities 216,592 – 216,592Borrowings 992,848 – 992,848Deferred income 77,159 (1,714) 75,445Employee benefits 85,200 – 85,200Derivative financial instruments 19,435 – 19,435Amounts due to related parties 17 – 17

2,119,842 (87,050) 2,032,792

Total liabilities 5,920,857 (242,964) 5,677,893

Net assets 2,444,196 (15,720) 2,428,476

Share capital and reservesShare capital 895,926 – 895,926Treasury shares (44,081) – (44,081)Capital reserves 113,184 – 113,184Other reserves (56,653) (13) (56,666)Retained earnings 1,273,886 (15,707) 1,258,179Equity attributable to owners of the Company 2,182,262 (15,720) 2,166,542Non-controlling interests 261,934 – 261,934

2,444,196 (15,720) 2,428,476

Total equity and liabilities 8,365,053 (258,684) 8,106,369

268 ST ENGINEERING



Consolidated Income Statement

31 December 2017

GroupFRS

framework$’000

SFRS(I) 15$’000

SFRS(I)framework

$’000

Revenue 6,619,491 (98,428) 6,521,063Cost of sales (5,296,209) 87,931 (5,208,278)Gross profit 1,323,282 (10,497) 1,312,785

Distribution and selling expenses (169,488) – (169,488)Administrative expenses (474,045) – (474,045)Other operating expenses (126,404) – (126,404)profit from operations 553,345 (10,497) 542,848

Other income 39,944 – 39,944Other expenses (1,278) – (1,278)Other income, net 38,666 – 38,666

Finance income 38,222 428 38,650Finance costs (56,271) (1,411) (57,682)Finance costs, net (18,049) (983) (19,032)

Share of results of associates and joint ventures, net of tax 49,332 – 49,332

profit before taxation 623,294 (11,480) 611,814

Taxation (87,867) 2,146 (85,721)profit for the year 535,427 (9,334) 526,093

Attributable to:Shareholders of the Company 511,882 (9,250) 502,632Non-controlling interests 23,545 (84) 23,461

535,427 (9,334) 526,093




Consolidated Statement of Comprehensive Income

31 December 2017

GroupFRS

framework$’000

SFRS(I) 15$’000

SFRS(I) framework

$’000

profit for the year 535,427 (9,334) 526,093

Other comprehensive incomeItems that will not be reclassified subsequently to

profit or loss:Defined benefit plan remeasurements (6,109) – (6,109)

Items that are or may be reclassified subsequently to profit or loss:

Net fair value changes on available-for-sale financial assets 8,670 – 8,670

Net fair value changes on cash flow hedges 56,112 – 56,112Share of net fair value changes on cash flow hedges of

joint ventures (127) – (127)Foreign currency translation differences (47,327) 1 (47,326)Share of foreign currency translation differences of

associates and joint ventures (11,102) – (11,102)Reclassification of foreign currency translation reserve to

profit or loss arising from disposal of foreign entities 2,161 – 2,1618,387 1 8,388

Other comprehensive income for the year, net of tax 2,278 1 2,279Total comprehensive income for the year, net of tax 537,705 (9,333) 528,372

Total comprehensive income attributable to:Shareholders of the Company 502,229 (9,249) 492,980Non-controlling interests 35,476 (84) 35,392

537,705 (9,333) 528,372

Notes to the reconciliations

A. SFRS(I) 1

In adopting SFRS(I) in 2018, the Group has applied the transition requirements in SFRS(I) 1 with 1 January 2017 as the date of transition. SFRS(I) 1 generally requires that the Group applies SFRS(I) that are effective as at 31 December 2018 on a retrospective basis, as if such accounting policy had always been applied, subject to the mandatory exceptions and optional exemptions in SFRS(I) 1. The application of the mandatory exceptions and the optional exemptions in SFRS(I) 1 did not have any significant impact on the financial statements.

270 ST ENGINEERING



Notes to the reconciliations (continued)

B. SFRS(I) 15 – Revenue from Contracts with Customers

SFRS(I) 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. Under SFRS(I) 15, the Group is required to identify distinct performance obligations (PO) in bundled arrangements and account for each PO separately.

The Group is also required to estimate the amount of consideration to which it expects to be entitled and variable amounts are included in contract revenue to the extent that it is probable that there will be no significant reversal when the uncertainty is resolved.

For contracts that contain significant financing components, the Group adjusts the transaction price for the effects of the time value of money.

The Group adopted SFRS(I) 15 in its financial statements using the retrospective approach. All requirements of SFRS(I) 15 have been applied retrospectively, except for the application of the practical expedients as described below, and the information presented for 2017 has been restated.

The Group has applied the following practical expedients as allowed under SFRS(I) 1.

• Completedcontractsthatbeganandendedinthesameannualreportingperiodin2017andcontractscompleted at 1 January 2017 are not restated.

• Forcompletedcontractsthathavevariableconsideration,theGroupusedthetransactionpriceatthedate the contract was completed to restate comparative information.

• Forcontractsmodifiedbefore1January2017,theGrouphasreflectedtheaggregateeffectofallofthe modifications that occurred before 1 January 2017 when identifying the satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations.

• Fortheyearended31December2017,theGroupdidnotdisclosetheamountofthetransactionpriceallocated to the remaining performance obligations and an explanation of when the Group expects to recognise that amount as revenue.

C. SFRS(I) 9 – Financial Instruments

SFRS(I) 9 contains new requirements for classification and measurement of financial instruments, a new expected credit loss model for calculating impairment of financial assets, and new general hedge accounting requirements.

Classification of financial assets and financial liabilities

Under SFRS(I) 9, financial assets are classified in the following categories: measured at amortised cost, FVOCI–debtinstrument,FVOCI–equityinstrument;orFVTPL.TheclassificationoffinancialassetsunderSFRS(I) 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. SFRS(I) 9 eliminates the previous FRS 39 categories of held-to-maturity, loans and receivables and available-for-sale. Under SFRS(I) 9, derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never separated. Instead, the hybrid financial instrument as a whole is assessed for classification.





C. SFRS(I) 9 – Financial Instruments (continued)

Classification of financial assets and financial liabilities (continued)

Changes in accounting policies resulting from the adoption of SFRS(I) 9 have been applied by the Group retrospectively, except as described below.

• Thefollowingassessmentsweremadeonthebasisoffactsandcircumstancesthatexistedat1January2018.- The determination of the business model within which a financial asset is held;- The determination of whether the contractual terms of a financial asset give rise to cash flows

that are solely payments of principal and interest on the principal amount outstanding;- Thedesignationofanequityinvestmentthatisnotheld-for-tradingasatFVOCI;and- The designation and revocation of previous designations of certain financial assets and financial

liabilitiesmeasuredatFVTPL.

• Ifadebtinvestmenthaslowcreditriskat1January2018,theGrouphadassumedthatthecreditriskon the asset has not increased significantly since its initial recognition.

• Newhedgeaccountingrequirementsareappliedprospectively.Allhedgingrelationshipsdesignatedunder FRS 39 at 31 December 2017 met the criteria for hedge accounting under SFRS(I) 9 at 1 January 2018 and therefore were regarded as continuing hedging relationships.

The following table and the accompanying notes below explain the original measurement categories under FRS 39 and the new measurement categories under SFRS(I) 9 for each class of the Group’s financial assets as at 1 January 2018.

272 ST ENGINEERING





Classification of financial assets and financial liabilities (continued)

1 January 2018

Group Note

OriginalclassificationunderFRS 39

NewclassificationunderSFRS(I) 9

Originalcarryingamount

under FRS 39

$’000

Newcarryingamount

underSFRS(I) 9

$’000

Other investments including derivatives

Equity investments (a) Available-for-sale

FVOCI–Equityinstrument 9,728 9,728

Debt investments Available-for-sale

FVOCI–Debtinstrument 350,975 350,975

Derivative financial instruments FV–HedgingInstruments

FV–HedgingInstruments 35,336 35,336

Derivative financial instruments Designated asFVTPL

Mandatorily atFVTPL 18,247 18,247

Financial assets

Trade receivables (b) Loans and otherreceivables

Amortised cost940,725 940,725

Amounts due from related parties (b) Loans and other receivables


Advances and other receivables (b) Loans and other receivables


Bank balances and other liquid funds (b) Loans and other receivables


Total financial assets 2,471,440 2,471,440

(a) These equity investments represent investments that the Group intend to hold for the long term for strategicpurposes.TheGrouphavedesignatedtheseinvestmentsat1January2018asmeasuredatFVOCI. Unlike FRS 39, the accumulated fair value reserve related to these investments will never be reclassified to profit or loss.

(b) Trade and other receivables that were classified as loans and receivables under FRS 39 are now classified at amortised cost. An increase of $4,196,000 in the allowance for impairment was recognised in opening retained earnings of the Group at 1 January 2018 on transition to SFRS(I) 9.






Impairment of financial assets

SFRS(I) 9 replaces the ‘incurred loss’ model in FRS 39 with an ‘expected credit loss’ (ECL) model. The new impairment model applies to financial assets measured at amortised cost, contract assets, debt investments atFVOCIandintra-groupfinancialguaranteecontracts,butnotequityinvestments.Theadoptionofthenew impairment model under SFRS(I) does not affect the carrying amount of intra-group financial guarantee contracts at 1 January 2018, as the amount initially recognised less the cumulative amount of income recognised in accordance with SFRS(I) 15 is higher than the estimated ECL amount.

As a result of the adoption of SFRS(I) 9, the Group presented impairment loss related to trade receivables and contract assets separately in Note B3.

The application of SFRS(I) 9 impairment requirements at 1 January 2018 results in additional allowances for impairment as follows:

Group $’000

Loss allowance at 31 December 2017 under FRS 39 41,774Additional impairment recognised at 1 January 2018 on: Trade receivables as at 31 December 2017 4,196Loss allowance at 1 January 2018 under SFRS(I) 9 45,970

Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount oftheassets.FordebtinvestmentsatFVOCI,thelossallowanceisrecognisedinOCI,insteadofreducingthe carrying amount of the asset.

Additional information about how the Group measure the allowance for impairment is described in Note C13.

For an explanation of how the Group applies hedge accounting under SFRS(I) 9, see note C15.

Transition impact on equity

The following table summarises the impact, net of tax, of transition to SFRS(I) 9 on reserves, retained earnings and NCI at 1 January 2018.

GroupImpact of adopting SFRS(I) 9

at 1 January 2018$’000

Retained earnings Closing balance under FRS 39 (31 December 2017) 1,289,653

Recognition of expected credit losses under SFRS(I) 9 (3,607)Related tax 10Opening balance under SFRS(I) 9 (1 January 2018) 1,286,056

274 ST ENGINEERING

SECTORAL FINANCIAL REVIEW – AEROSPACEINCOME STATEMENT

2018$’000

2017$’000

Revenue 2,654,119 2,546,913Cost of sales (2,190,755) (2,108,291)Gross profit 463,364 438,622

Distribution and selling expenses (26,078) (10,487)Administrative expenses (124,063) (119,356)Other operating expenses (45,075) (36,512)profit from operations 268,148 272,267

Other income 30,380 13,793Other expenses (13,281) (5,261)Other income, net 17,099 8,532

Finance income 8,773 8,489Finance costs (14,773) (11,994)Finance costs, net (6,000) (3,505)

Share of results of associates and joint ventures, net of tax 40,748 41,171profit before taxation 319,995 318,465

Taxation (54,644) (51,453)profit for the year 265,351 267,012

Attributable to:Shareholder of the Company 244,627 244,840Non-controlling interests 20,724 22,172

265,351 267,012


SECTORAL FINANCIAL REVIEW – AEROSPACEBALANCE SHEET

2018$’000

2017$’000

1 January2017$’000

ASSETS

Non-current assetsProperty, plant and equipment 930,228 848,949 833,628Associates and joint ventures 248,906 248,168 244,263Investments – 12 12Intangible assets 516,246 473,671 433,294Long-term receivables 18,863 18,552 2,333Deferred tax assets 27,377 18,993 27,356Derivative financial instruments 572 3,663 221Employee benefits – 243 151

1,742,192 1,612,251 1,541,258Current assetsContract assets 297,808 353,132 355,504Inventories 410,712 368,621 341,046Trade receivables 483,572 289,845 339,548Amount due from related parties 51,070 38,462 24,301Advances and other receivables 74,153 95,585 116,026Short term investments – – 364Bank balances and other liquid funds 294,210 322,896 272,683

1,611,525 1,468,541 1,449,472

Total assets 3,353,717 3,080,792 2,990,730


Current liabilitiesContract liabilities 446,179 391,292 330,801Deposits from customers 2,222 1,588 2,444Trade payables and accruals 619,533 535,777 548,897Amount due to related parties 263,889 338,085 244,950Provisions 38,305 77,240 61,161Provision for taxation 70,231 61,942 60,941Borrowings 303,716 53,902 64,805Employee benefits 2,401 2,491 1,916

1,746,476 1,462,317 1,315,915

Net current (liabilities)/assets (134,951) 6,224 133,557

Non-current liabilitiesContract liabilities 113,093 130,641 197,911Trade payables and accruals 35,717 57,163 70,238Deferred tax liabilities 150,484 157,117 158,831Borrowings 140,414 99,642 83,771Employee benefits 107,276 101,793 84,531Derivative financial instruments 5,558 – 6,734Amount due to related parties 95,663 112,384 94,671

648,205 658,740 696,687

Total liabilities 2,394,681 2,121,057 2,012,602Net assets 959,036 959,735 978,128

Share capital and reserves 689,618 696,325 734,653Non-controlling interests 269,418 263,410 243,475

959,036 959,735 978,128

TOTAL EQUITY AND LIABILITIES 3,353,717 3,080,792 2,990,730

276 ST ENGINEERING

SECTORAL FINANCIAL REVIEW – AEROSPACESTATEMENT OF CASH FLOWS

2018$’000

2017$’000

Net cash from operating activities 248,136 392,908

Net cash used in investing activities (238,773) (143,054) Proceeds from sale of property, plant and equipment 3,162 1,124 Dividends from associates and joint ventures 31,307 47,054 Dividends from investments – 7 Purchase of property, plant and equipment (221,164) (123,073) Investment in joint ventures and an associate (1,408) (21,108) Proceeds from disposal of subsidiaries 4,433 – Proceeds from disposal of associates 23,480 – Proceeds from sale of an investment 39 388 Proceeds from sale of intangible assets 47 – Development of intangible assets (78,669) (47,446)

Net cash used in financing activities (325,146) (194,181) Capital contribution from non-controlling interests 432 397 Proceeds from bank loans 79,614 56,805 Repayment of bank loans (68,912) (46,922) Repayment of lease obligations, net (2,513) (784) Proceeds from related party loans 264,997 92,817 Loan to a related party – (6,017) Repayment of related party loans (349,313) (93,156) Dividends paid to shareholder (238,914) (174,904) Dividends paid to non-controlling interests (3,001) (14,081) Interest paid (7,536) (8,336)

Net (decrease)/increase in cash and cash equivalents (315,783) 55,673Cash and cash equivalents at beginning of the year 322,896 272,683Exchange difference on cash and cash equivalents at beginning of the year 3,072 (5,460)Cash and cash equivalents at end of the year 10,185 322,896


2018$’000

2017$’000

2016$’000

2015$’000

2014$’000

Income StatementRevenue 2,654,119 2,546,913 2,492,857 2,095,614 2,071,464Profit EBITDA 381,163 375,804 353,419 293,483 321,637 EBIT 268,148 272,267 240,431 222,013 261,471 PBT 319,995 318,465 300,318 290,600 282,999 Net Profit 244,627 244,840 234,385 226,720 220,144

Balance SheetProperty, plant and equipment 930,228 848,949 833,628 820,145 671,068Intangible and other assets 793,290 761,576 706,002 465,133 470,953Inventories and work-in-progress 410,712 368,621 475,477 494,257 560,001Trade receivables, contract assets,

deposits and prepayments 925,277 778,750 727,046 626,286 579,149Bank balances and other liquid funds 294,210 322,896 272,683 234,274 243,856

Current liabilities 1,746,476 1,462,317 1,339,342 1,262,967 1,139,953Non-current liabilities 648,205 658,740 691,214 611,257 639,407

Share capital 368,512 368,512 368,512 368,512 368,512Capital and other reserves (14,683) (4,576) (9,517) (18,560) (41,493)Retained earnings 335,789 332,389 381,810 336,358 341,402Non-controlling interests 269,418 263,410 243,475 79,561 77,246

Financial IndicatorsEarnings per share (cents) 52.21 52.26 50.03 48.39 46.99Net assets value per share (cents) 147.19 148.62 158.12 146.49 142.67Return on sales (%) 10.0 10.5 10.1 11.2 11.1Return on equity (%) 31.2 30.9 28.1 29.2 29.2Return on total assets (%) 7.9 8.7 8.3 8.9 9.1Return on capital employed (%) 13.6 13.3 13.7 16.9 15.7

productivity DataAverage staff strength (numbers) 8,182 8,192 7,600 7,126 7,314Revenue per employee ($) 324,385 310,902 328,008 294,080 283,219Net profit per employee ($) 29,898 29,888 30,840 31,816 30,099Employment costs 760,064 752,319 747,045 625,475 607,228Employment costs per $ of revenue ($) 0.29 0.30 0.30 0.30 0.29

EconomicValueAdded 150,859 141,259 154,055 169,548 162,092EconomicValueAddedspread(%) 7.6 7.2 7.9 11.1 10.1EconomicValueAddedperemployee($) 18,438 17,244 20,270 23,793 22,162

Valueadded 1,209,185 1,190,984 1,178,284 1,002,326 975,569Valueaddedperemployee($) 147,786 145,384 155,037 140,658 133,384Valueaddedper$ofemploymentcosts($) 1.59 1.58 1.58 1.60 1.61Valueaddedper$ofgrossproperty,

plant and equipment ($) 0.66 0.70 0.72 0.64 0.72Valueaddedper$ofrevenue($) 0.46 0.47 0.47 0.48 0.47

Figures from FY2014 to FY2016 were prepared in accordance with the previous FRS and were not restated on adoption of SFRS (I).

SECTORAL FINANCIAL REVIEW – AEROSPACEFINANCIAL HIGHLIGHTS

278 ST ENGINEERING

SECTORAL FINANCIAL REVIEW – ELECTRONICSINCOME STATEMENT

2018$’000

2017$’000



Other income 15,718 14,911Other expenses (53) (66)Other income, net 15,665 14,845

Finance income 2,533 1,778Finance costs (9,375) (8,989)Finance costs, net (6,842) (7,211)

Share of results of associates and joint ventures, net of tax (4,905) (2,282)profit before taxation 224,692 200,198

Taxation (37,419) (31,433)profit for the year 187,273 168,765

Attributable to:Shareholder of the Company 186,491 168,772Non-controlling interests 782 (7)

187,273 168,765


2018$’000

2017$’000

1 January2017$’000

ASSETS

Non-current assetsProperty, plant and equipment 246,892 233,744 212,030Associates and joint ventures 62,749 54,523 1,565Investments 9,562 9,359 10,114Intangible assets 358,766 333,744 347,989Long-term trade receivables 1,172 – 966Deferred tax assets 16,630 20,831 25,889Derivative financial instruments 269 163 845

696,040 652,364 599,398Current assetsContract assets 703,354 502,227 473,601Inventories 86,654 80,290 92,306Trade receivables 343,745 317,062 401,961Amounts due from related parties 26,913 32,426 38,020Advances and other receivables 72,378 75,767 77,235Bank balances and other liquid funds 307,956 295,564 236,180

1,541,000 1,303,336 1,319,303

Total assets 2,237,040 1,955,700 1,918,701


Current liabilitiesContract liabilities 478,116 454,247 556,462Deposits from customers – 67 4Trade payables and accruals 560,337 454,671 470,140Amounts due to related parties 289,937 181,705 101,719Provisions 60,922 63,734 64,755Provision for taxation 37,884 38,386 43,739

1,427,196 1,192,810 1,236,819


Non-current liabilitiesContract liabilities 145,492 109,330 56,332Trade payables and accruals 21,499 34,229 34,620Deferred tax liabilities 11,839 7,949 7,700Employee benefits 740 876 669Deferred income 5,607 6,475 1,108Derivative financial instruments 8 824 –Amounts due to related parties 297,024 314,416 318,603

482,209 474,099 419,032



327,635 288,791 262,850


SECTORAL FINANCIAL REVIEW – ELECTRONICSBALANCE SHEET

280 ST ENGINEERING

2018$’000

2017$’000

Net cash from operating activities 198,691 207,822

Net cash used in investing activities (102,030) (136,988) Proceeds from sale of property, plant and equipment 63 43 Proceeds from disposal of an unquoted investment 104 – Dividends from an associate – 114 Purchase of property, plant and equipment (52,696) (59,028) Investments in an associate and a joint venture (13,381) (55,013) Additions to other intangible assets (36,120) (23,104)

Net cash used in financing activities (333,616) (7,202) Repayment of related party loans (82,631) (207,183) Repayment of loans by a related party 52,000 – Repayment of loans to a joint venture (30,805) (19,607) Proceeds from related party loans 30,584 194,891 Proceeds of loans from a joint venture 17,925 36,463 Loans to a related party (52,000) – Dividends paid to shareholder (263,000) (5,363) Dividends paid to non-controlling interests (605) – Interest paid (5,063) (6,272) Deposits pledged (21) (131)

Net decrease in cash and cash equivalents (236,955) (63,632)Cash and cash equivalents at beginning of the year 294,205 234,952Exchange difference on cash and cash equivalents at beginning of the year 208 (4,379)Cash and cash equivalents at end of the year 57,458 294,205

SECTORAL FINANCIAL REVIEW – ELECTRONICSSTATEMENT OF CASH FLOWS


2018$’000

2017$’000

2016$’000

2015$’000

2014$’000



deposits and prepayments 1,146,783 926,585 630,476 499,940 606,661Bank balances and other liquid funds 307,956 295,564 236,180 271,435 277,528

Current liabilities 1,427,196 1,192,810 1,270,920 1,114,278 1,086,428Non-current liabilities 482,209 474,099 513,017 523,445 510,536

Share capital 52,522 52,522 52,522 52,522 52,522Capital and other reserves 2,598 (3,240) 23,432 15,802 (5,135)Retained earnings 265,739 233,486 189,918 148,764 144,460Non-controlling interests 6,776 6,023 6,610 7,220 5,259



EconomicValueAdded 165,358 133,753 138,891 130,117 118,650EconomicValueAddedSpread(%) 18.5 14.4 17.0 17.8 16.6EconomicValueAddedperemployee($) 25,963 20,358 21,147 20,676 19,998

Valueadded 901,081 893,495 887,570 833,641 764,967Valueaddedperemployee($) 141,479 135,996 135,136 132,471 128,934Valueaddedper$ofemploymentcosts($) 1.49 1.41 1.42 1.41 1.43Valueaddedper$ofgrossproperty,



SECTORAL FINANCIAL REVIEW – ELECTRONICSFINANCIAL HIGHLIGHTS

282 ST ENGINEERING

SECTORAL FINANCIAL REVIEW – LAND SYSTEMSINCOME STATEMENT

2018$’000

2017$’000



Other income 12,775 11,230Other expenses (12,071) (1,766)Other income, net 704 9,464

Finance income 1,375 935Finance costs (6,290) (6,820)Finance costs, net (4,915) (5,885)

Share of results of associates and joint ventures, net of tax 7,396 11,229profit before taxation 62,261 85,039

Taxation (8,726) 3,677profit for the year 53,535 88,716

Attributable to:Shareholder of the Company 52,860 87,420Non-controlling interests 675 1,296

53,535 88,716


SECTORAL FINANCIAL REVIEW – LAND SYSTEMSBALANCE SHEET

2018$’000

2017$’000

1 January2017$’000

ASSETS

Non-current assetsProperty, plant and equipment 235,445 296,739 298,689Associates and joint ventures 92,206 108,233 126,737Investments – – 86Intangible assets 240,882 245,371 200,881Deferred tax assets 17,790 12,753 18,246Amounts due from related parties 5,842 5,719 6,180Derivative financial instruments 7,738 12,099 1,780


1,118,723 958,458 1,062,616

Total assets 1,718,626 1,639,372 1,715,215


Current liabilitiesContract liabilities 199,066 140,605 242,016Deposits from customers 1,885 – 58Trade payables and accruals 326,914 323,725 350,550Amounts due to related parties 188,128 23,712 83,692Provisions 69,589 65,835 100,206Provision for taxation 16,615 20,466 29,585Borrowings 56 15,322 11,064Derivative financial instruments 5,174 5,432 12,614

807,427 595,097 829,785


Non-current liabilitiesContract liabilities 238,856 310,778 252,724Trade payables and accruals – 4,680 499Amounts due to related parties 233,637 316,221 282,490Borrowings 184 15 155Deferred income 416 34,756 32,340Deferred tax liabilities 45,265 40,744 63,329Derivative financial instruments 13,975 13,071 6,437

532,333 720,265 637,974



378,866 324,010 247,456


284 ST ENGINEERING

SECTORAL FINANCIAL REVIEW – LAND SYSTEMSSTATEMENT OF CASH FLOWS

2018$’000

2017$’000

Net cash (used in)/from operating activities (36,429) 29,023

Cash flows used in investing activities (16,262) (52,010)Proceeds from sale of property, plant and equipment 265 80Proceeds from sale of unquoted equity investment – 93Disposal of subsidiaries, net of cash disposed (1,878) 8,324Acquisition of subsidiary, net of cash acquired – (50,005)Acquisition of subsidiary under common control – (6,876)Dividends from associates 23,250 29,511Purchase of property, plant and equipment (37,280) (30,416)Purchase of intangible assets (619) (2,721)

Cash flows from/(used in) financing activities 60,195 (12,994)Interest paid (5,372) (3,783)Repayment of related party loans (22,286) (69,864)Proceeds from related party loans 92,620 59,167Repayment of other loans (148) (137)Proceeds from bank loans 7,712 3,161Repayment of bank loans (9,988) (3,859)Proceeds from a loan from non-controlling interest – 5,152Dividends paid to related parties (1,779) (679)Dividends paid to non-controlling interests (594) (1,929)Deposits discharged 30 –Acquisition of non-controlling interests in a subsidiary – (223)

Net increase/(decrease) in cash and cash equivalents 7,504 (35,981)Cash and cash equivalents at beginning of the year 135,670 173,752Exchange difference on cash and cash equivalents at beginning of the year (95) (2,101)Cash and cash equivalents at end of the year 143,079 135,670


2018$’000

2017$’000

2016$’000

2015$’000

2014$’000




Current liabilities 807,427 595,097 836,529 966,904 988,985Non-current liabilities 532,333 720,265 635,037 773,858 975,968

Share capital 194,445 194,445 194,445 194,445 194,445Capital and other reserves 69 (2,537) 5,911 14,695 13,739Retained earnings 172,770 120,667 35,769 20,334 15,640Non-controlling interests 11,582 11,435 11,331 41,543 49,379



EconomicValueAdded 1,337 24,347 (39,512) 16,760 6,312EconomicValueAddedspread(%) 0.1 3.3 (6.0) 0.9 (0.3)EconomicValueAddedperemployee($) 281 4,970 (6,811) 2,451 876




SECTORAL FINANCIAL REVIEW – LAND SYSTEMSFINANCIAL HIGHLIGHTS

286 ST ENGINEERING

SECTORAL FINANCIAL REVIEW – MARINEINCOME STATEMENT

2018$’000

2017$’000

Revenue 574,354 637,531Cost of sales (468,074) (559,857)Gross profit 106,280 77,674


Other income 6,809 7,122Other expenses (276) (109)Other income, net 6,533 7,013

Finance income 3,072 2,690Finance costs (4,275) (3,196)Finance costs, net (1,203) (506)

Share of results of associate and joint ventures, net of tax 555 1,106profit before taxation 50,260 22,408

Taxation (5,059) 4,641profit for the year 45,201 27,049


2018$’000

2017$’000

1 January2017$’000

ASSETS

Non-current assetsProperty, plant and equipment 303,001 319,653 315,031Associate and joint ventures 4,099 10,493 8,666Intangible assets 92 121 134Long-term receivables 1,870 1,854 1,129Deferred tax assets 46,313 27,002 21,334Amounts due from related parties 4,806 4,806 4,806Derivative financial instruments 1,362 2,400 2,397


442,634 536,468 531,086

Total assets 804,177 902,797 884,583

EQUITY AND LIABILITIESCurrent liabilitiesContract liabilities 202,698 255,918 249,666Deposits from customers 104 – –Trade payables and accruals 252,957 210,068 251,840Amounts due to related parties 147,673 147,210 61,461Provisions 42,641 50,251 49,497Provision for taxation 19,236 10,562 304Borrowings – 9,359 11,558

665,309 683,368 624,326

Net current liabilities (222,675) (146,900) (93,240)

Non-current liabilitiesTrade payables and accruals 16,271 19,298 23,409Deferred income 36,382 37,230 41,997Amounts due to related parties 43,327 43,327 26,343Derivative financial instruments 307 726 2,107

96,287 100,581 93,856

Total liabilities 761,596 783,949 718,182Net assets 42,581 118,848 166,401

Share capital and reserves 42,581 118,848 166,375Non-controlling interests – – 26

42,581 118,848 166,401

TOTAL EQUITY AND LIABILITIES 804,177 902,797 884,583

SECTORAL FINANCIAL REVIEW – MARINEBALANCE SHEET

288 ST ENGINEERING

SECTORAL FINANCIAL REVIEW – MARINESTATEMENT OF CASH FLOWS

2018$’000

2017$’000

Net cash from/(used in) operating activities 212,412 (4,351)

Net cash used in investing activities (2,886) (44,336) Proceeds from disposal of property, plant and equipment 449 590 Purchase of property, plant and equipment (10,309) (44,176) Dividends from joint ventures 6,524 1,050 Investment in associate and joint venture (8) (1,800) Disposal of a joint venture 441 – Disposal of other intangible assets 17 –

Net cash (used in)/from financing activities (130,358) 52,947 Repayment of related party loans (43,047) – Repayment of bank loans (9,233) (1,396) Proceeds from related party loans 29,106 109,660 Loans to related parties (87,900) (70,000) Repayment of loans by related parties 104,900 95,000 Dividends paid to shareholder (120,000) (77,158) Interest paid (4,184) (3,116) Return of capital to non-controlling interests – (43)

Net increase in cash and cash equivalents 79,168 4,260Cash and cash equivalents at beginning of the year 84,751 81,860Exchange difference on cash and cash equivalents at beginning of the year 87 (1,369)Cash and cash equivalents at end of the year 164,006 84,751


2018$’000

2017$’000

2016$’000

2015$’000

2014$’000

Income StatementRevenue 574,354 637,531 841,160 958,373 1,341,951Profit EBITDA 74,360 43,670 91,998 101,404 127,933 EBIT 44,375 14,795 63,576 71,795 100,835 PBT 50,260 22,408 75,121 88,275 122,780 Net Profit 45,201 27,049 67,757 85,725 108,086



Current liabilities 665,309 683,368 715,617 709,493 856,315Non-current liabilities 96,287 100,581 93,856 101,234 99,068

Share capital 50,856 50,856 50,856 50,856 50,856Capital and other reserves 10,977 12,445 9,863 9,051 2,494Retained earnings (19,252) 55,547 105,656 132,186 105,484Non-controlling interests – – 26 32 38



EconomicValueAdded 18,161 5,200 51,113 76,544 93,593EconomicValueAddedspread(%) 6.8 1.8 19.7 35.8 37.3EconomicValueAddedperemployee($) 13,276 3,417 30,244 42,011 49,678




SECTORAL FINANCIAL REVIEW – MARINEFINANCIAL HIGHLIGHTS

290 ST ENGINEERING

SHAREHOLDINGSTATISTICSAS AT 25 FEBRUARY 2019

SHARE CApITAL

Paid-Up Capital (including treasury shares) : S$895,925,583.405Number of issued ordinary shares (excluding treasury shares) : 3,119,914,644Number of ordinary shares held in treasury : 2,580,553Percentage of such holding against the total number of issued ordinary shares (excluding ordinary shares held in treasury)

: 0.08%

Class of Shares : Ordinary Shares One Special Share held by the Minister for Finance

VotingRights : One vote per share

SHAREHOLDING HELD IN HANDS OF pUBLIC

Based on the information available to the Company as at 25 February 2019, 47.93% of the issued ordinary shares of the Company is held by the public and therefore, Rule 723 of the Listing Manual issued by SGX-ST is complied with.

ANALYSIS OF SHAREHOLDINGS

Range of Shareholdings No. of Shareholders %

No. of Shares (excluding

treasury shares) %*

1 --- 99 906 2.58 20,241 0.00100 --- 1,000 5,087 14.52 4,157,369 0.131,001 --- 10,000 22,877 65.28 103,618,434 3.3210,001 --- 1,000,000 6,143 17.53 237,344,295 7.611,000,001 and above 32 0.09 2,774,774,305 88.94

35,045 100.00 3,119,914,644 100.00

No. of Shares

Substantial Shareholder Direct

InterestDeemedInterest

TotalInterest %*

Temasek Holdings (Private) Limited 1,554,764,574 67,339,429 (1) 1,622,104,003 51.99

Notes:

* The percentage of issued ordinary shares is calculated based on the number of issued ordinary shares of the Company (excluding ordinary shares held in treasury) as at 25 February 2019.

(1) Includes deemed interests held through subsidiaries and associated companies.


SHAREHOLDINGSTATISTICSAS AT 25 FEBRUARY 2019

MAJOR SHAREHOLDERS LIST – TOp 20

No. Name No. of Shares Held %*

1 Temasek Holdings (Private) Limited 1,554,764,574 49.83

2 Citibank Nominees Singapore Pte Ltd 393,038,068 12.60

3 DBS Nominees (Private) Limited 337,528,171 10.82

4 DBSN Services Pte. Ltd. 178,481,389 5.72

5 HSBC (Singapore) Nominees Pte Ltd 118,821,931 3.81

6 Raffles Nominees (Pte.) Limited 40,450,340 1.29

7 BPSS Nominees Singapore (Pte.) Ltd. 37,365,831 1.20

8 VestalInvestmentsPte.Ltd. 28,501,000 0.91

9 United Overseas Bank Nominees (Private) Limited 13,045,258 0.42

10 Morgan Stanley Asia (Singapore) Securities Pte Ltd 9,643,965 0.31

11 DB Nominees (Singapore) Pte Ltd 8,396,727 0.27

12 DBSVickersSecurities(Singapore)PteLtd 7,865,142 0.25

13 OCBC Nominees Singapore Private Limited 7,441,025 0.24

14 Merrill Lynch (Singapore) Pte. Ltd. 5,831,694 0.19

15 Phillip Securities Pte Ltd 3,823,876 0.12

16 Tan Pheng Hock 3,315,785 0.11

17 OCBC Securities Private Limited 3,212,646 0.10

18 UOB Kay Hian Private Limited 2,437,494 0.08

19 NTUC Fairprice Co-Operative Ltd 2,240,000 0.07

20 Heng Siew Eng 2,112,000 0.07

2,758,316,916 88.41

* The percentage of issued ordinary shares is calculated based on the number of issued ordinary shares of the Company (excluding ordinary shares held in treasury) as at 25 February 2019.

292 ST ENGINEERING

INTERESTED pERSON TRANSACTIONS

Interested person transactions carried out during the financial year pursuant to the Shareholders’ Mandate obtained under Chapter 9 of the Listing Manual of the Singapore Exchange Securities Trading Limited (SGX) by the Group are as follows:

Aggregate value of all transactions excluding transactions conducted

under a shareholders mandate pursuant to

Rule 920 of the SGX Listing Manual

Aggregate value of all transactions conducted

under a shareholders mandate pursuant to

Rule 920 of the SGX Listing Manual

FY2018$’000

FY2017$’000

FY2018$’000

FY2017$’000

Transactions for the Sale of Goods and ServicesSATS Ltd. and its Associates – – 7,562 857 SembCorp Industries Ltd and its Associates – – 4,549 2,548 Singapore Airlines Limited and its Associates – – 1,397 222 SIA Engineering Company Limited and its Associates – – – 102 Singapore Telecommunications Limited and its Associates – – 1,534 414 StarHub Ltd and its Associates – – 668 – Temasek Holdings (Private) Limited and its Associates

(non-listed) – – 36,177 23,262 – – 51,887 27,405

Transactions for the purchase of Goods and ServicesMapletree Industrial Trust – – 417 1,068 SATS Ltd. and its Associates – – 3,617 3,353 SembCorp Industries Ltd and its Associates – – 12,726 – Singapore Telecommunications Limited and its Associates – – 6,728 3,268 StarHub Ltd and its Associates – – 2,601 1,114 Temasek Holdings (Private) Limited and its Associates

(non-listed) – 55,326 30,499 9,905 – 55,326 56,588 18,708

Total Interested person Transactions – 55,326 108,475 46,113

SGX LISTING MANUAL REQUIREMENTS31 DECEMBER 2018(CURRENCY – SINGAPORE DOLLARS)


CORPORATE INFORMATION

BOARD OF DIRECTORS

Kwa Chong Seng, Chairman

VincentChong,President & CEO

Quek See Tiat

Lieutenant-General Ong Su Kiat Melvyn Quek Gim Pew

Khoo Boon Hui

Dr Beh Swan Gin

Lim Sim Seng

Lim Ah Doo Lim Chin Hu

Song Su-Min

Colonel Xu Youfeng(Alternate Director to Lieutenant-GeneralOng Su Kiat Melvyn)

COMpANY SECRETARY

Karen Ng Kwee Lian

REGISTERED OFFICE

ST Engineering Hub1 Ang Mo Kio Electronics Park Road#07-01 Singapore 567710Tel : (65) 6722 1818Fax : (65) 6720 2293www.stengg.com

SHARE REGISTRAR

M & C Services Private Limited 112 Robinson Road #05-01 Singapore 068902

AUDITORS

KPMG LLP 16 Raffles Quay #22-00 Hong Leong Building Singapore 048581

Quek Shu Ping (Partner-in-charge) (Date of Appointment: 15 February 2017)

294 ST ENGINEERING

This annual report has been certified by the Forest Stewardship Council™ as an example of environmentally responsible forestry print production. From the forest, to the paper mill and printer, each step of this annual report’s production is certified according to FSC™ standards.

An

nu

Al R

epoR

t 2018

ST Engineering Hub1 Ang Mo Kio Electronics Park Road, #07-01, Singapore 567710

Tel: (65) 6722 1818Fax: (65) 6720 2293

(Regn. No. 199706274H)

www.stengg.com

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